U.S. Imposes 26% Tariff On Indian Imports In Trade Policy Setback

The United States has imposed a 26% tariff on imports from India, dealing a blow to New Delhi’s hopes of securing trade relief under President Donald Trump’s global trade policy. The move adds to weeks of market uncertainty as Washington escalates its efforts to address trade imbalances.

A baseline 10% tariff took effect on Saturday, with the full 26% rate set to be implemented on April 9.

“They (India) are charging us 52%, and we have charged almost nothing for years and decades,” Trump said at the White House while announcing the new trade measures.

The latest tariffs on India come as part of a broader U.S. trade strategy. Washington has already imposed higher duties on other countries, including a combined 54% tariff on Chinese imports and a 46% tariff on Vietnam.

Markets React to Tariffs

India’s stock markets responded with relative stability compared to other Asian markets. The Nifty 50 and BSE Sensex declined by 0.3% at the open—far lower than the 1.5% to 3% drops seen elsewhere in the region. The Indian rupee slipped by as much as 0.3% to 85.75 against the U.S. dollar before recovering slightly to 85.65.

Despite the setback, India maintains a competitive advantage in key industries due to the relatively lower tariffs, according to the Global Trade Research Institute.

However, the new tariffs will significantly impact India’s exports, with nearly $14 billion worth of electronics and over $9 billion worth of gems and jewelry among the hardest-hit sectors.

Pharma Sector Exempted

In a move welcomed by India’s pharmaceutical industry, the Trump administration has exempted pharmaceutical exports from the tariff. The United States remains a crucial market for Indian drugmakers, accounting for nearly one-third of India’s pharmaceutical exports, valued at approximately $9 billion in the last fiscal year.

Following the exemption announcement, shares of Indian pharmaceutical companies rose nearly 5% in early trading on Thursday, contrasting with broader market losses.

Tariffs Linked to Trade Deficit

The White House cited tariff and non-tariff barriers, including currency policies, as the rationale behind the 26% duty. U.S. officials claimed that India has imposed “uniquely burdensome” non-tariff barriers, which Washington argues have restricted American exports. The removal of these barriers, they said, could increase U.S. exports by at least $5.3 billion annually.

The tariffs will remain in place until Trump determines that the “threat posed by the trade deficit and underlying non-reciprocal treatment is satisfied, resolved, or mitigated,” the White House said in a statement. The U.S. currently has a $46 billion trade deficit with India.

Pressure on Modi

The new tariff measures place added pressure on Indian Prime Minister Narendra Modi, who has maintained a strong relationship with Trump, to negotiate relief for Indian exporters.

Last week, Reuters reported that New Delhi is considering reducing tariffs on $23 billion worth of U.S. imports in an effort to offset the impact on key Indian sectors, including pharmaceuticals, gems and jewelry, and auto parts.

Modi’s administration has previously made efforts to accommodate U.S. concerns, including lowering tariffs on high-end motorcycles and bourbon while eliminating a tax on digital services that affected American tech companies.

Despite the new tariffs, some Indian exporters could see a silver lining. Ajay Sahai, director general of the Federation of Indian Export Organisations, noted that India’s apparel and footwear industries may benefit since the tariffs imposed on India remain lower than those on key competitors like Vietnam and Bangladesh.

Before the latest trade action, the U.S. had some of the lowest tariff rates globally, with a simple average of 3.3%—compared to India’s 17%—according to White House data.