Tariffs and tech : strain between U.S. and India what happens?

What are tariffs and how do they work ?

Tariffs are taxes charged on goods bought from other countries.

Why do governments impose tariffs:

● Raise government revenue– tariffs serve as a source of income for governments.

● Protect domestic industries and correct trade imbalances– tariffs shelter domestic industries from foreign competition and discourage consumption of imported goods.

● Political tools for negotiations– tariffs can be used to apply pressure on the foreign government they are imposed on, as part of a trade negotiation or a political tool.

What tariffs has Trump announced and why?

Trump says tariffs will encourage US consumers to buy more American-made goods, increase the amount of tax raised and boost investment. He wants to reduce the gap between the value of goods the US buys from other countries and those it sells to them – known as the trade deficit. He argues that America has been taken advantage of by “cheaters”, and “pillaged” by foreigners. The president has announced different tariffs against specific goods, and imports from individual countries.

Which tariffs has the US put in place on specific goods?

The taxes on goods imported to the US include:

● 50% tariff on steel and aluminium imports.

● 50% tariff on copper imports.

● 25% tariff on foreign-made cars and imported engines and other car parts.

What tariffs Trump imposed on India?

United States President Donald Trump’s 50 percent tariff on Indian goods, which is expected to impact trade worth billions of dollars and risk thousands of jobs in the world’s most populous nation, took effect on Wednesday. The US first slapped a 25 percent tariff on India on July 30 and a week later imposed an additional 25 percent, citing New Delhi’s purchase of Russian oil. The real challenge for the Indian economy is uncertainty over how these tariffs will evolve. Will the rates come down or stay at the current levels for a longer period? Can the Trump administration impose further penalties due to India’s ties with Russia? In an August 18, 2025, report, Fitch Ratings pointed out that India-based corporations generally have low direct exposure to US tariffs, but sectors that are currently unaffected, including pharmaceuticals, could be hit by further US tariff announcements. US tariffs on Indian goods have risen to as much as 50 per cent, raising concerns that the steep tax on Indian exports to the US will hit sectors such as textiles, gems and jewellery, and mechanical appliances, potentially dragging India’s economic growth lower by as much as 1 per cent.

What is the Indian government doing to mitigate the impact?

Prime Minister Modi has pledged to protect farmers, cut taxes and push for self-reliance in the wake of tariff hikes. India “should become self-reliant – not out of desperation, but out of pride … Economic selfishness is on the rise globally and we mustn’t sit and cry about our difficulties,” Modi said in his Independence Day speech at New Delhi’s Red Fort. Faisal Ahmed, professor of geopolitics at Fore School of Management in New Delhi, says increasing the domestic productive capacity of India is not new. “It was a policy choice taken by Modi during the COVID-19 pandemic. Trump’s tariffs look set to accelerate that process,” Ahmed told Al Jazeera. On top of the $12bn income tax giveaway announced earlier this year, the Indian prime minister also said that businesses could expect a “massive tax bonanza” soon. It’s also understood that Delhi is planning to lower and simplify the goods and services tax. This, along with a boost to the salaries of nearly five million state employees and 6.8 million pensioners (which will kick in next year), could help India’s economy retain some growth momentum.

Bhumi Arora