Former U.S. President Donald Trump has unveiled a sweeping revision of tariff policies, imposing new levies on nearly 70 countries. Among the most notable decisions is the maintenance of a 25% tariff on Indian goods, while Pakistan’s tariff rate has been reduced from 29% to 19%. These adjustments are part of what Trump calls the “Liberation Day” tariffs—designed to penalize nations based on their trade practices and alignments with U.S. strategic interests. The new tariffs are scheduled to take effect from August 7, 2025, offering a brief window for businesses to adjust and comply.
For India, the continuation of the 25% tariff poses serious economic implications. Key export sectors such as pharmaceuticals, auto components, telecommunications equipment, and gems are expected to be impacted the most. Experts estimate that this could lead to an annual export loss of $5–7 billion, potentially reducing India’s GDP growth rate by 0.15% to 0.2% for the fiscal year. The U.S. administration has also hinted at additional penalties linked to India’s ongoing purchases of energy and defense equipment from Russia. The move has drawn criticism from Indian political leaders, who accuse the current government of failing diplomatically, especially after recent efforts to strengthen U.S.-India ties.
In contrast, Pakistan appears to have gained significantly from the new tariff structure. With its rate reduced to 19%, the country is benefiting from a broader trade and energy collaboration deal with the U.S., which includes development of Pakistan’s oil reserves. Interestingly, Trump has suggested that the extracted oil could one day be sold to India—a statement that has raised eyebrows in both countries. The decision signals a shift in U.S. regional trade preferences, with some analysts interpreting it as a geopolitical message tied to compliance and cooperation.
These tariffs form part of Trump’s broader second-term strategy to rebalance global trade, introducing a minimum 10% tariff for most countries and higher rates for those with significant trade surpluses or perceived political differences with the U.S. While some nations have already begun negotiations for exemptions or adjustments, India and the U.S. remain in talks with no immediate signs of compromise. Business leaders and policymakers in India are now evaluating potential responses, including retaliatory tariffs, shifting supply chains, and appealing to the World Trade Organization (WTO).
As the August 7 deadline approaches, global markets are reacting with caution. In India, the stock market has shown signs of strain, and the rupee has weakened amid concerns of reduced export revenues. Meanwhile, Pakistani officials have welcomed the reduced tariffs as an opportunity to boost trade volumes with the U.S., especially in textiles and raw materials.
This tariff development is a critical juncture in U.S.–South Asia economic relations. It underscores the increasing intertwining of geopolitical alignment and trade policy, and presents both a challenge and a test for India’s economic diplomacy in the months ahead.
