The Effects of US Tariffs on Indian Products: How Prices of Goods Will Change Between India and the USA

Tariffs—taxes imposed on imported goods—play a pivotal role in international trade by influencing the prices of products exchanged between countries. A tariff is a financial charge or levy placed by a government on goods entering or leaving a country, typically to protect domestic industries, generate revenue, or as a tool in trade negotiations. Tariffs can be fixed (a specific amount per unit) or ad valorem (a percentage of the value of the goods). Changes in tariff rates can significantly affect the cost of goods, supply chains, and consumer prices.

How Tariffs Change and Their Historical Context

Tariffs are not static—they can shift due to political, economic, and diplomatic developments. Trade negotiations, economic sanctions, or efforts to protect domestic industries often trigger these changes. Prior to recent adjustments, average U.S. tariffs on Indian goods hovered around 3–4% for many non-sensitive products. However, the latest policy change in 2025 raised tariffs on select Indian goods up to 26%, including key exports like pharmaceuticals and seafood.

India, on the other hand, is reviewing tariff cuts on $23 billion worth of U.S. goods to protect its $66 billion export economy, indicating a tactical response to these trade pressures.

The recent implementation of tariffs between the United States and India has significantly affected the cost of goods in both nations, leading to economic and consumer implications.

The Effects of Tariffs: How Prices of Goods Will Change Between India and the USA

Overview of US-India Trade Relations

India and the United States share a robust trade relationship. As of FY 2023-24, bilateral trade stood at $118 billion, with India enjoying a trade surplus of $32 billion. Key Indian exports to the US include pharmaceuticals, textiles, electronics, jewelry, iron and steel products, and marine items. The US accounts for 18% of India’s total exports, making it a crucial trading partner.

However, the introduction of reciprocal tariffs by President Donald Trump on April 9, 2025, has disrupted this dynamic. The tariffs aim to reduce the US trade deficit with India ($35.31 billion in 2023-24) and protect domestic manufacturing industries.

Impact on Indian Exports

The new tariffs are projected to significantly affect several key sectors:

• Marine Items: Exports of fish and crustaceans are expected to decline by 20.2%, making them less competitive in the US market.
• Iron and Steel Products: These goods will face an 18% drop due to increased costs for US buyers.
• Jewelry and Precious Metals: Exports are forecasted to fall by 15.3%, impacting India’s significant jewelry industry.
• Electronics and Telecom Products: A 12% reduction is anticipated as tariffs make these products less affordable.
• Vehicles and Auto Components: Exports could shrink by 12.1%, further straining India’s automobile sector.

Overall, India’s exports to the US are expected to decline by $5.76 billion in 2025—a contraction of 6.41% compared to the previous year.

Sector-Wise Impact of Tariffs

The following table highlights the expected impact of tariffs on various Indian export sectors:

Price Changes in the USA

For American consumers, tariffs will result in higher prices for Indian goods:

• If a product previously cost $100, it could now cost $126 after accounting for the 26% tariff.

This price increase may lead consumers to seek alternatives from other countries or domestic producers.

Interestingly, while Indian goods face higher tariffs, they remain relatively competitive compared to imports from China (34% tariff) and Vietnam (46% tariff). This gives India a slight edge in sectors like textiles and pharmaceuticals that are exempt from additional duties.

Economic Impact on India

The ripple effects of these tariffs extend beyond trade:

• Stock Market Reaction: India’s Nifty50 index has dropped by 14%, reflecting investor concerns over reduced export earnings.
• Foreign Investment Outflows: More than $15 billion has been withdrawn by foreign investors since the announcement of tariffs.
• GDP Slowdown: Economists predict that India’s GDP could shrink by up to 0.6% due to reduced exports and slower economic activity.

Strategic Response from India

India is actively negotiating solutions with global trade bodies like the WTO while exploring diversification strategies:

• Market Diversification: Indian exporters are seeking alternative markets in Europe, Africa, and Southeast Asia to offset losses in the US.
• Domestic Manufacturing Push: The government’s Union Budget 2025 emphasizes rationalizing customs duties to strengthen local industries.
• Trade Diplomacy: India is working toward a Bilateral Trade Agreement with the US that could stabilize relations and mitigate future tariff impacts.

Opportunities Amid Challenges

Despite setbacks, certain sectors may benefit:

• Textiles: India’s competitive edge in textiles could attract more US buyers shifting away from higher-tariff countries like Vietnam.
• Pharmaceuticals: Exempt from additional duties, Indian pharmaceuticals remain strong players in the US market.

Impact on U.S. Consumers

The U.S. administration’s imposition of a 26% tariff on Indian imports has led to increased prices for various products. For instance, Indian pharmaceuticals, which constitute a substantial portion of U.S. generic drug imports, are now subject to higher duties. This escalation is likely to raise medication costs for American consumers, potentially leading to inflation and drug shortages.

Similarly, the U.S. shrimp industry has been affected by tariffs on imported shrimp from countries like India. While these tariffs aim to protect domestic shrimpers, they may result in higher seafood prices for consumers. In Bayou La Batre, Alabama, local shrimpers have expressed optimism about the tariffs revitalizing their industry, but the broader consumer market may experience price increases as a consequence.

Impact on Indian Exporters

Indian exporters are facing challenges due to the increased tariffs imposed by the U.S. The seafood sector, particularly shrimp exports, has been notably impacted. Coastal Corporation, a major Indian shrimp exporter, reported that while U.S. buyers are currently absorbing the tariff costs to maintain supply chains, the long-term sustainability of this arrangement is uncertain. Consequently, Indian exporters are exploring alternative markets, such as China and Russia, to mitigate reliance on the U.S. market.

Reciprocal Tariffs and Trade Negotiations

In response to U.S. tariffs, India has been considering its tariff structures and trade policies. The Indian government has expressed a willingness to reduce tariffs on certain U.S. imports to foster better trade relations and shield its exports from further tariff hikes. Negotiations have included discussions about lowering tariffs on over half of the U.S. goods imported into India, aiming to balance trade dynamics and prevent escalation into a full-blown trade war.

Broader Economic Implications

The imposition of tariffs has broader economic consequences, including potential inflationary pressures and supply chain disruptions. In the U.S., increased import costs can lead to higher consumer prices, contributing to inflation. In India, sectors heavily reliant on U.S. markets, such as pharmaceuticals and IT services, may experience reduced demand, affecting economic growth and employment.

The imposition of tariffs by the United States marks a significant shift in trade dynamics between India and its largest trading partner. While Indian exports face challenges across key sectors like electronics, jewelry, and automobiles, opportunities exist in textiles and pharmaceuticals due to exemptions or competitive advantages.

As both nations navigate this evolving landscape, strategic responses such as market diversification and strengthened trade diplomacy will be crucial for mitigating economic losses. For consumers in both countries, these tariffs mean higher prices for imported goods—highlighting the far-reaching consequences of protectionist policies on global trade systems.