Trump’s Tariffs Shake India & South Asia: Economic Impacts

CREDIT:The US is a key trading partner for India | Photo: Bloomberg

US President Donald Trump’s new trade tariffs, announced on August 1, 2025, are sending shockwaves through South Asia, particularly India. With a 25% tariff slapped on Indian goods and additional penalties for ties with Russia, the region braces for economic fallout. However, India’s robust economy might weather the storm better than its neighbors. Here’s how these tariffs impact India and South Asia, explained simply for readers across all continents.

Why Trump Imposed Tariffs

The Trump administration introduced a 25% tariff on Indian imports, citing India’s $44.4 billion trade surplus with the US, its energy and defense ties with Russia, and its role in the BRICS bloc. Additionally, an unspecified penalty targets India’s purchases of Russian oil and weapons. According to a BBC report, Trump called India a “tariff king” for its high import duties, pushing for reciprocal trade measures to reduce the US trade deficit.

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For South Asia, the tariffs vary. Pakistan enjoys a reduced 19% tariff, down from 29%, alongside a new US energy partnership. Meanwhile, Bangladesh and Sri Lanka face 20% tariffs, and Laos and Myanmar deal with a steep 40%. These changes, effective August 7, 2025, aim to address what Trump calls “unfair trade practices.”

Impact on India’s Economy

India’s $86.5 billion in exports to the US, its largest trading partner, faces significant challenges. The 25% tariff, layered on existing duties like 50% on steel and 25% on auto parts, raises costs for key sectors. For instance, textiles, which account for 28% of India’s exports to the US, will see duties jump to 31-34%. Gems, jewelry, and telecom products could face 30-38.5% tariffs, making them less competitive.

However, some sectors dodge the bullet. Pharmaceuticals, worth $12.2 billion in exports, are currently exempt, offering relief to companies like Sun Pharma and Dr. Reddy’s. Analysts at Bernstein note that India’s healthcare sector is less exposed to tariff impacts, providing a buffer.

Despite the tariff hike, experts believe India’s economy is resilient. “India’s strong domestic market and diversified exports limit the damage,” says Ajay Srivastava of the Global Trade Research Initiative. He adds that India could negotiate a trade deal to lower tariffs, as Trump’s executive order allows for reductions if countries align with US interests. Visit AMERICA NEWS WORLD for more insights on global trade policies.

South Asia Feels the Heat

South Asia’s smaller economies face tougher challenges. Bangladesh, the world’s second-largest garment exporter, is hit hard by a 20% tariff. With major US buyers like Walmart pausing orders, the country’s garment industry, which supports millions, is at risk. Sri Lanka’s garment sector, making up 40% of its export revenue, could lose over 100,000 jobs, warns former president Ranil Wickremesinghe. Nepal faces a 10% baseline tariff, while Pakistan’s lower 19% tariff gives it a slight edge, though analysts caution it may not offset competition from countries like Egypt.

Opportunities Amid Challenges

Interestingly, India could gain in some areas. With China facing a 30% tariff and Bangladesh and Vietnam hit with 20%, India’s textiles and apparel sectors might become more competitive. “India’s cost efficiencies in infrastructure and electricity keep it attractive for US buyers,” a Karachi-based economist told ThePrint. Companies like Apple, which assemble iPhones in India, are likely to stay despite higher costs, as supply chains are hard to shift quickly.

Economic Data and Trends

To illustrate the impact, here’s a chart showing the tariff rates across South Asia and their effect on exports:

This chart, compatible with mobile and desktop, highlights the varying tariff burdens across South Asia. India’s 25% rate is high but not as severe as Laos or Myanmar’s 40%.

India’s Response and Future Steps

India’s government is treading carefully. Commerce Minister Piyush Goyal emphasized protecting farmers and small businesses, signaling that agriculture and dairy remain non-negotiable in trade talks. India has already cut tariffs on US goods like motorcycles and whiskey, but a broader deal remains elusive. “We’re optimistic about a fair trade agreement,” Goyal told Reuters, hinting at ongoing negotiations.

Analysts suggest India should focus on diplomacy rather than retaliation. “A trade deal could reduce tariffs to 15-20%,” says Srivastava, noting that countries like Japan and the EU secured lower rates through agreements. For updates on India’s trade strategies, check AMERICA NEWS WORLD.

Global and Regional Reactions

The tariffs have sparked varied responses. Pakistan celebrated its reduced rate, but Bangladesh’s interim leader Mohammad Yunus called the 20% tariff a diplomatic win, down from a feared 37%. Sri Lanka’s trade unions warn of job losses, while Southeast Asian nations like Indonesia and Malaysia face 19% tariffs, raising concerns about Chinese goods transshipment.

What’s Next for South Asia?

As tariffs take effect, India’s diversified economy and strategic importance as a US ally could help it navigate the storm. However, smaller nations like Bangladesh and Sri Lanka face tougher roads. For India, securing a trade deal by fall 2025 is crucial to mitigate losses. Meanwhile, South Asia must brace for higher costs and shifting supply chains.

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