What Trump’s Tariffs Mean for India and the World

India Now Faces 26% Tariffs on Exports to the US

April 7, 2025

Photo by Gage Skidmore, licensed under CC BY-SA 2.0

U.S. President Donald Trump has announced significant tariff increases on imports, aiming to address trade imbalances and bolster domestic industries. A universal 10% tariff was imposed on all imported goods, with higher rates targeting specific countries based on trade deficits. These tariffs have led to immediate global economic repercussions.

A “tariff” is a tax that a government adds to goods coming into the country from abroad. Governments use tariffs to protect local businesses by making foreign products cost more, so people might choose local ones instead.

China faced an additional 44% tariff, totalling 54%, while India was subjected to an extra 16%, culminating in a 26% tariff on its exports to the U.S., according to media reports.

Stock markets worldwide experienced sharp declines; the S&P 500 and Dow Jones each dropped over 5%, and Japan’s Nikkei 225 fell nearly 8%.

In India, the BSE Sensex and Nifty 50 indices each dropped over 3.5% in early trading on April 7. Further, shares of Tata Motors plunged 10% after its subsidiary, Jaguar Land Rover, paused exports to the U.S. due to the newly imposed import tariff.

When tariffs are suddenly increased, especially on a global scale, investors worry that it will slow down international trade and hurt company profits. This fear spreads quickly in stock markets, leading to large sell-offs. A drop of over 5% in major indexes in just a day or two is a big deal—it signals panic or deep concern among investors. Such a crash can affect ordinary people too, as it can hurt retirement funds, make it harder for companies to raise money, and in some cases, lead to job cuts if businesses start feeling the pressure.

Economists are worried that the world economy might slow down badly – a global recession, which means many countries could face problems like job losses, lower incomes and less business activity. Financial company JPMorgan has estimated a 6 in 10 chance that this could happen soon, mainly because of the new trade taxes and their impact on businesses and prices.

In response, several countries have threatened or implemented retaliatory measures. 

China announced a 34% tax on all U.S. imports, condemning the tariffs as unjust and harmful to global trade stability. The European Union and Japan also expressed strong disapproval, with Japan hinting at possible countermeasures.

The new U.S. tariffs on Indian goods have caused concern among Indian businesses and economists. The tariffs mean Indian exports to the U.S. will become more expensive, which might reduce demand for them. This could hurt industries like textiles, engineering goods and chemicals that depend heavily on the American market.

If exports fall, companies may earn less, possibly leading to job losses and slower production in some sectors. That’s why experts are watching closely to see how much these trade restrictions might affect the larger economy.

However, Indian government officials have claimed they are sticking to their earlier economic growth forecast for the 2025–2026 financial year. They believe that strong domestic demand, infrastructure investments and private consumption will help keep growth steady. However, some economists have warned that India’s growth rate could dip slightly—by about 20 to 40 basis points (or 0.2% to 0.4%)—because of the tariffs. While that might not sound like much, even a small slowdown can affect jobs, investment plans and overall confidence in the economy.

There’s also a worry that goods from various countries which can no longer be sold easily in the U.S. because of the high tariffs might flood into other countries like India at very low prices. This dumping can hurt Indian businesses because local producers won’t be able to compete with the cheaper imported products. If this happens, small and medium industries in India could see a drop in sales, leading to financial strain, reduced production or even job losses.

India has opted not to retaliate against the U.S. tariffs immediately, focusing instead on ongoing trade negotiations aimed at securing an early deal by autumn 2025.