US Tariffs On India: How Penalty With Possible BRICS Levies Can Impact Trade

US President Donald Trump announced a 25% tariff on Indian exports on Wednesday ahead of the Aug. 1 deadline. Trump also hinted at further, unspecified penalties linked to India's continued imports of Russian military equipment and energy.

While the 25% tariff puts India in a relatively moderate position when compared to some Asian peers, the proposed additional penalties — including a potential BRICS-wide surcharge — could tip the balance unfavourably for Indian exporters.

At face value, the 25% tariff still places India in a better position than some regional rivals. China, embroiled in a prolonged trade war with the US, faces levies as high as 51%, while Bangladesh is facing 35% and Sri Lanka 30%.

In contrast, Vietnam has managed to negotiate a more favourable arrangement — 20% tariffs for locally produced goods. Indonesia has also secured a relatively lenient 19%. Japan, meanwhile, benefits from a strategic trade agreement capping duties at 15%.

India’s 25% tariff matches that imposed on Malaysia, but without a bilateral deal or special provisions, India’s overall position remains uncertain.

Adding to the uncertainty is Trump’s threat of an additional 10% tariff on nations that continue purchasing Russian oil — a policy aimed squarely at BRICS countries, including India. Should this surcharge be imposed, India’s effective tariff burden could climb to 35%, erasing its competitive edge and aligning it more closely with the higher end of the tariff spectrum.

Such a move would likely hit price-sensitive sectors hard, especially those relying on the US market. Industries such as automotive components and pharmaceuticals, where cost efficiency is critical, could see reduced demand and narrowing margins.

Despite months of back-and-forth, India and the US have yet to finalise an interim or "mini" trade agreement. The lack of a formal pact leaves Indian exports vulnerable to further unilateral actions.