How US Tariffs Are Set to Hit: Unpacking the Economic Fallout

The recent announcement by the United States to impose a 25% tariff on all imports from India, starting August 1, 2025, marks one of the most serious setbacks in bilateral trade relations between the world's largest and fifth-largest economies.

- TDG NETWORK

Justified by former President Donald Trump as a necessary response to the "massive trade deficit" with India and its "unfair tariff regime," the measure arrives with wider implications than just numbers on customs receipts.

It coincides with a rising tide of economic nationalism and growing U.S. frustration over India's perceived closeness with Russia and reluctance to open sensitive sectors like dairy and agriculture.

The decision is not without nuance. Alongside the blanket tariff, the U.S. has imposed a 50% duty on copper imports from India, and more strikingly, has threatened a 200% tariff on Indian pharmaceutical products.

The latter is to be preceded by a grace period of 12-18 months, offering Indian firms time to shift manufacturing or renegotiate supply chains.

However, these sector-specific moves reveal a deeper tension in the trade narrative—where economics, security, and strategic autonomy converge.

At its most basic, a 25% tariff means a quarter of the invoice value of Indian goods will now be collected by U.S. customs.

For American importers, this makes Indian goods significantly more expensive—often pushing them to switch to suppliers from countries with whom the U.S. has free trade agreements or lower barriers.

For Indian exporters, especially those operating on thin margins, the cost escalation may be impossible to absorb.

If a $100 shirt or automotive part from India now costs $125 at entry, the odds of it competing with equivalent products from Bangladesh, Vietnam, or Mexico drop drastically.

It also adds friction to just-in-time supply chains where cost and time sensitivity are paramount.

Two sectors—pharmaceuticals and copper—have emerged as bellwethers of this new tariff landscape.

India's pharmaceutical industry is critical to the U.S. healthcare system, supplying nearly 40% of generic medicines used by American consumers.