The United States imposed a fresh 10% tariff on Indian goods effective July 25, 2026, replacing the temporary duty that had been in place, as part of a broader Section 301 action covering 60 trading partners. The new duty is lower than the 12.5% rate initially proposed in June and excludes several sensitive categories, including generic pharmaceuticals, smartphones, steel, aluminium and auto components.
The US Trade Representative finalised the measure under Section 301 of the Trade Act of 1974, citing concerns over imports linked to forced labour practices across the 60 economies affected, which include Canada, Mexico, the United Kingdom and India. India’s 10% rate is notably below the 12.5% imposed on China, positioning India relatively more favourably among major Asian exporters to the US market.
How Does the New US Tariff Affect Indian Exporters?
India’s Ministry of Commerce and Industry said that roughly 45% of India’s $87.2 billion in merchandise exports to the US will remain outside the new levy, since categories such as steel, aluminium, copper, automobiles and auto components are already governed separately under Section 232 of the Trade Expansion Act, with duties of 25% to 50% that do not stack with the new Section 301 rate. For the remaining exposed exports, the shift from a MFN baseline to the new 10% duty raises landed costs for Indian goods entering the US, though less sharply than the 12.5% rate originally floated.
What Do Economists and Trade Officials Say?
Trade officials in New Delhi have framed the outcome as a relative win given that India’s rate sits below China’s, while cautioning that the tariff still raises costs for exposed sectors such as textiles, gems and jewellery, and engineering goods. Economists tracking the negotiations say the tariff differential between India and competing exporters like Vietnam and Bangladesh will be a key factor in whether Indian exporters retain market share in the US over the coming year.
Market and Trade Reaction
Indian equity markets showed measured reaction to the tariff implementation, with export-oriented sectors such as IT services and pharmaceuticals more sensitive to related announcements, including a separate move to raise tariffs on generic drugs from August 2026. The rupee held relatively steady as the final 10% rate came in below the previously feared 12.5%, easing some pressure that had built up in currency markets ahead of the deadline.
What Happens Next?
India has said it will continue engaging with Washington to conclude a broader bilateral trade agreement that could supersede these tariff measures for specific sectors. Negotiators are expected to resume talks in the coming weeks, with market access for agricultural and dairy goods, and further tariff relief for exposed Indian sectors, likely to remain the central sticking points.
Frequently Asked Questions
What tariff rate has the US imposed on India?
The US imposed a 10% Section 301 tariff on Indian goods effective July 25, 2026, lower than the 12.5% rate initially proposed and below China’s 12.5% rate.
Which Indian exports are exempt from the new tariff?
Generic pharmaceuticals, smartphones, steel, aluminium and auto components are excluded, since several of these are already covered under separate Section 232 duties.
Will the tariff affect the India-US trade deal talks?
India has said it will keep engaging with the US on a bilateral trade agreement despite the new tariff, with both sides aiming to address market access and further tariff relief.
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