In a development that holds long-term promise for bilateral economic ties, India and the United States are expected to resume trade negotiations in mid-August, keeping alive the prospect of a comprehensive agreement by the third quarter of 2025. Despite the jolt from US President Donald Trump’s announcement of a 25% tariff on Indian exports, both sides appear committed to continuing dialogue—signalling that diplomacy may yet triumph over discord.
While the US deadline for tariff implementation is August 2, the US trade delegation is still expected to visit India in the latter half of August for the 6th round of Bilateral Trade Agreement (BTA) negotiations.
Trump declared the steep tariffs via a Truth Social post on July 30, accusing India of maintaining “far too high” tariffs and “obnoxious” non-monetary trade barriers. “India is a great friend,” he said, “but we must ensure fairness for American workers.” The tariffs, which come into effect August 1, cover a broad range of Indian exports to the U.S.
Adding to the strain, Trump also announced an additional penalty—unspecified in nature—on India for its continued purchase of Russian energy and military equipment. This, he suggested, was necessary given the geopolitical backdrop of the Ukraine war and India’s strong ties with Moscow.
Despite the tough rhetoric, Indian officials are responding with measured optimism. A senior trade ministry official, speaking off the record, said: “A rushed, patchwork deal would have come with significant social and political costs. The government prefers a well-negotiated agreement, even if it takes a little longer. A short period of higher tariffs, followed by a mutually agreed, lower and predictable tariff regime for the next three years, is a far better outcome—for economic growth, the rupee, and the stock markets.”
Exporters in key sectors like gems, auto parts, textiles, and pharma are bracing for short-term disruption. However, with structured negotiations resuming, industry leaders hope for a stable tariff roadmap that restores competitiveness and provides certainty for planning and investment.
Ashwin Sapra, Partner (Head – Pharma & Healthcare), Cyril Amarchand Mangaldas, underlined the gravity of the situation for pharmaceutical companies. “The 25% tariffs would likely increase costs for Indian pharma companies, reduce their competitiveness, profit margins, and raise US drug prices, potentially causing shortages. To mitigate tariff impacts, Indian companies may need to diversify exports to markets like Europe, Africa, or Asia. However, the US’s large market share (35%–40% of India’s pharma exports) makes this challenging.”
He added, “President Trump’s tariffs aim to incentivize drug production in the US, but relocating manufacturing is complex and costly. Setting up new plants in the US requires 12–24 months for regulatory clearances, and higher labor costs make it unviable for low-margin generics. Indian firms with existing US facilities may have a better advantage over those that lack US manufacturing capabilities. We may see an increase in outbound acquisitions in the US manufacturing sector as more and more Indian companies seek measures to mitigate the financial blow likely to be caused as a result of these tariffs and the ‘America First’ policy as part of President Trump’s larger ‘MAGA’ objective. That said, time will tell how long these tariffs last and whether or not the Indian Government will step in to find a resolution.”
“If we play it right, this disruption could be the inflection point that turns Indian exports from volume-driven to value-led,” said Alay Razvi, Managing Partner, Accord Juris. “It also underlines the need for a calibrated geopolitical strategy balancing national interests with global trade realities. Targeted policy support for MSMEs and sector-specific skilling can ensure that the most vulnerable exporters are not left behind in this transition.”
If the mid-August talks are successful, they could replace uncertainty with a longer term framework of predictable trade terms—delivering long-term benefits to both economies. India remains open to both a comprehensive trade deal or an interim agreement on mutually accepted items.
However, legal experts caution that the unilateral U.S. measures could violate global trade norms. “The imposition of a 25% tariff on Indian exports to the United States, alongside punitive penalties for India’s energy and arms purchases from Russia, represents a concerning escalation,” said Rishabh Gandhi, Founder, Rishabh Gandhi and Advocates. “This unilateral action not only undermines the principles of the WTO but also disregards ongoing negotiations aimed at resolving trade disputes amicably. From an international trade law perspective, the U.S. tariffs risk violating the MFN clause under GATT and may constitute disguised retaliation.”
Gandhi added, “India must respond with strategic restraint and legal firmness, reinforcing its commitment to a rules-based international order while advancing Atmanirbhar Bharat.”
The broader industry response is cautious but clear-eyed. “With the 25% tariff and additional penalties looming, sectors like textiles, pharmaceuticals, jewelry, and electronics face potential impacts,” said Sachin Sharma, Managing Partner, KSV Tax Consultants. “The anticipated rise in costs for U.S. buyers may dampen demand and squeeze margins for Indian exporters.”
Rohit Jain, Managing Partner, Singhania & Co, echoed this sentiment: “There’s a lot of uncertainty. It’s not clear whether this is a negotiating tactic or the beginning of a bigger trade standoff.”
Tuhin Batra, Founding Partner at TrailBlazer Advocates, warned of broader consequences: “India’s 7 trillion Rupees worth of annual exports are at risk. Engineering goods, electronics, gems and jewellery, pharmaceuticals, and garments will likely face the harshest impact. If the Government is pressured into a rushed deal, domestic sectors like agriculture and dairy could bear the brunt—especially with U.S. interest in opening Indian markets to these areas.”
From a legal standpoint, Tushar Kumar, Advocate at the Supreme Court of India, stressed the importance of asserting India’s rights: “Such conduct is inconsistent with the principles of non-discrimination, MFN treatment, and fair notice. India must assert its position through formal diplomatic channels and, if required, pursue remedies available under international trade law.”
India’s options, according to legal experts, include initiating WTO consultations to signal legal resistance, imposing calibrated retaliatory tariffs under the Customs Tariff Act, 1975, and accelerating market diversification through alliances like the Quad. The government is also expected to support exporters with relief packages and trade finance tools while prioritising G2-level talks to de-escalate tensions.
As India and the U.S. prepare for their next round of talks, one fact remains unchanged: global trade thrives on dialogue, not diktats.
