Explained: Impact of Trump’s new tariffs on Indian businesses

US President Donald Trump on Wednesday announced the imposition of a 25 per cent additional import duty plus penalty on goods imported from IndiaThe duty will come into effect from August 1 An unspecified penalty has also been imposed on India for purchasing crude oil and military equipment from RussiaThe announcement came as a surprise as the two countries are negotiating a trade agreement Here is a list of Q and A questions and answers to explain the impact of the US moveWhat is a tariffThese are customs or import duties imposed on the import of goods The importer has to pay this duty to the government Normally companies pass on these taxes to end usersHow much tariff is announced on IndiaThe US has announced to impose a 25 per cent tariff plus a penalty for buying Russias crude oil and military equipment However the US has not specified the quantum of the penalty and how it will be imposed An executive order from the White House on the 25 per cent tariff plus penalty will give clarity on the duty structureA 10 per cent duty announced on April 2 applies to all goods Besides there is a 50 per cent tariff on steel and aluminium and 25 per cent on auto and auto parts These duties are imposed over and above the existing tariffs on Indian goods For example textiles attract a 69 per cent tariff at present so after adding the 25 per cent Indian textile goods entering the US from August 1 will attract a 3134 per cent duty A penalty could be added further on thisWhy is the US imposing these tariffsThe US has alleged that it faces a significant trade deficit with India blaming New Delhi for imposing high tariffs on American goods which it says restricts US exports to the Indian marketWhat is bilateral trade between India and the USDuring 202125 the US was Indias largest trading partner in goods The US accounts for about 18 per cent of Indias total exports 622 per cent in imports and 1073 per cent in bilateral trade In 202425 the bilateral trade touched USD 186 billion USD 865 billion exports and USD 453 billion importsWith America India had a trade surplus the difference between imports and exports of USD 41 billion in 202425 It was USD 3532 billion in 202324 and USD 277 billion in 202223In services India exported an estimated USD 287 billion and imported USD 255 billion adding a USD 32 billion surplusAltogether India ran a total trade surplus of about USD 444 billion with the USHowever according to think tank GTRI the US runs a USD 3540 billion overall surplus when revenues from education digital services financial activities royalties and arms trade are factored inWhat are the major products traded between the twoIn 2024 Indias main exports to the US included drug formulations and biologicals USD 81 billion telecom instruments USD 65 billion precious and semiprecious stones USD 53 billion petroleum products USD 41 billion vehicle and auto components USD 28 billion gold and other precious metal jewellery USD 32 billion readymade garments of cotton including accessories USD 28 billion and products of iron and steel USD 27 billionImports included crude oil USD 45 billion petroleum products USD 36 billion coal coke USD 34 billion cut and polished diamonds USD 26 billion electric machinery USD 14 billion aircraft spacecraft and parts USD 13 billion and gold USD 13 billionWhat will be the impact of the tariffs on this tradeImport duty makes goods expensive in the importing country Besides a few other factors also play a role in this For example duties on Indias competitor nations such as Bangladesh 35 pc Vietnam 20 pc and Thailand 36 pc and quality and standards of itemsAccording to exporters Indian labourintensive goods such as garments leather and nonleather footwear gems and jewellery carpets and handicrafts may get impacted due to this dutyWhat will be the US tariffs on key Indian goods from August 1Telecom 25 pc gems and jewellery 30385 pc 5135 pc at present food and agri goods 2930 pc 1415 pc currently apparel 12 pc plus 25 pc The penalty component may also be there from August 1Is there a substance on Trumps allegations that India has very high tariffsAccording to experts no The US also imposes high duties on items like dairy products 188 per cent Fruits and vegetables 132 per cent Coffee tea cocoa and spices 53 per cent Cereals and food preparations 193 per cent Oilseeds fats and oils 164 per cent beverages and tobacco 150 per cent Minerals and metals 187 per cent and Chemicals 56 per centIndias average tariff rate of 17 per cent is higher than the USs 33 per cent but similar to other major economies like South Korea 134 per cent and China 75 per centThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever