Mihir Ajit Shah
U.S. Imposes 25% Reciprocal Tariff on Indian Exports: What Indian Exporters Must Know
The United States has officially imposed a 25% reciprocal tariff on Indian exports, effective August 7, 2025, under a new Executive Order signed on July 31, 2025. This development could significantly alter trade dynamics between the two countries. Here’s a simplified breakdown of what this means for Indian exporters, key legal references from the U.S. order, and the path forward.
🧾New U.S. Executive Order:
On July 31, 2025, the U.S. President signed an Executive Order titled:
“Further Modifying the Reciprocal Tariff Rates Applicable to Certain Countries Under Section 301 of the Trade Act of 1974.”
It introduces country-specific tariff rates aimed at addressing what the U.S. calls “large and persistent trade deficits.”
“I have determined that it is appropriate to modify the reciprocal tariff rates… to address the large and persistent trade deficits of the United States.”
– Section 1(a), Executive Order, July 31, 2025
The order sets a baseline tariff of 10% for most countries, but lists countries in Annex I for additional reciprocal tariff across all products (unless exempted).
📄Annex I: India Faces 25% Tariff
Annex I of the Executive Order specifies individual countries and their corresponding new tariff rates. India is prominently listed with the following:
India: 25%
This means that from August 7, 2025, most Indian goods exported to the U.S. will face an additional 25% duty, significantly affecting cost competitiveness.
⚙️ Annex II: Implementation and Negotiation Window
Annex II provides the operational and diplomatic flexibility:
It designates the U.S. Trade Representative (USTR) and the Secretary of Commerce to implement the new rates.
It allows the USTR to suspend or reduce tariffs for countries that enter reciprocal trade or security agreements.
“The USTR… may suspend or reduce the tariff rate for any country listed in Annex I, provided that such country commits to reciprocal trade concessions.”
This clause offers India a potential diplomatic route to seek reductions or exemptions through formal negotiations.
🕒 Timing of Applicability
The Executive Order was signed and published on July 31, 2025, but the tariff changes are not immediate.
As per the order, the 25% reciprocal tariff on Indian exports will become effective from August 7, 2025, at 12:01 a.m. Eastern Daylight Time.
This one-week gap between announcement and enforcement provides a narrow window for Indian exporters to review ongoing shipments, adjust commercial terms, and coordinate with U.S. buyers to factor in the increased duty impact. Any goods entering U.S. customs on or after this date will be subject to the revised tariff unless covered by a specific exemption.
⚠️ Clarification on “Penalty” Mentions
While the post by the US President earlier then the order issued date and basis the reports by several news outlets that the U.S. will impose an additional penalty on India for its trade with Russia (energy and military), this is not part of the official Executive Order text.
No such penalty is included in Annex I or II. Therefore, as of now:
- Only the 25% tariff is legally codified.
- Any “penalty” is likely a separate political statement, not a formal trade measure at this time.
✅ Final Summary
The Executive Order dated July 31, 2025, makes it official: India will face a 25% reciprocal tariff from the U.S. starting August 7. While this poses short-term challenges, Annex II offers India an opening for negotiation. Exporters must act quickly—by recalibrating their pricing strategies, engaging policymakers, and preparing for a reshaped trade reality.
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The Full text of the order can be downloaded from the link below:
https://www.whitehouse.gov/presidential-actions/2025/07/further-modifying-the-reciprocal-tariff-rates/
U.S. Suspends De Minimis Exemption for All Countries
U.S. Ends Duty-Free De Minimis Imports: A Historic Shift for Indian Exporters.
The U.S. government has officially suspended its de minimis exemption for all low-value shipments. This change, effective August 29, 2025, marks a major shift for Indian exporters and global e-commerce supply chains
🧭 What Is De Minimis?
The de minimis provision under 19 U.S.C. § 1321(a)(2)(C) allowed imports of goods valued under $800 per shipment to enter the U.S. without duties or taxes. This simplified process was a backbone of e-commerce and D2C (direct-to-consumer) exports to the U.S. But that’s now changed.
📜 What Does the New Executive Order Say?
On July 30, 2025, the President of the United States issued an Executive Order titled:
“Suspending Duty-Free De Minimis Treatment for All Countries”
This new order terminates the de minimis exemption for all countries, citing national security, trade enforcement, and public health concerns.
“The entry of covered articles under 19 U.S.C. 1321(a)(2)(C) shall not be permitted… whether such covered articles are imported by mail or otherwise.”
— Executive Order, Sec. 2(a), whitehouse.gov
This means that all low-value commercial shipments—regardless of the country of origin—must now enter the U.S. through formal customs procedures and will be subject to applicable duties, taxes, and fees.
Private Couriers (like DHL, FedEx, UPS): Must now process all shipments through formal U.S. Customs and pay full duties/taxes at the time of entry.
Postal Shipments: Given a 6-month transition period with flat-rate duties ($80–$200 per item), before switching to percentage-based (ad valorem) duties.
🗓️ When Does This Take Effect?
The suspension will come into force 30 days from the date of the order, i.e., on August 29,2025 at 12:01am eastern daylight time.
🌎 Who Is Affected?
✅ All countries are affected.
❌ No exemptions for friendly or developing nations. India is included—the previous advantage Indian exporters enjoyed under de minimis is now gone.
“This suspension shall apply regardless of the country of origin or export.”
— Executive Order, Sec. 2(b), whitehouse.gov
This move marks a turning point in global low-value trade.
This is the time to recalibrate your U.S. export strategy. Those who adapt quickly will continue to grow within the rules of the new global order.
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The Full text of the order can be downloaded from the link below:
https://www.whitehouse.gov/presidential-actions/2025/07/suspending-duty-free-de-minimis-treatment-for-all-countries/
Countdown Begins: India-EFTA TEPA Goes Live this October
In a significant update on India’s Free Trade Agreements (FTAs), Hon’ble Commerce & Industry Minister Shri Piyush Goyal recently announced at a public gathering that:
All four member countries have ratified the India-EFTA TEPA.
The necessary documents have been deposited with the official repository—Norway—and the Trade and Economic Partnership Agreement (TEPA) is set to come into force from October 1, 2025.
The India-EFTA TEPA was originally signed on March 10, 2024, marking a landmark partnership between India and the European Free Trade Association (EFTA) nations—Switzerland, Norway, Iceland, and Liechtenstein.
With procedural formalities now complete, this agreement is poised to be a major trade catalyst, opening new doors for economic cooperation, investment, and cross-border opportunities between India and the EFTA bloc.
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#IndianExports #FreeTradeAgreement #IndiaEFTA #TEPA #TradeUpdate #MakeInIndia #TradePartnership #BilateralTrade #ExportGrowth
