Business cycles · India + global · 2025
The August 2025 US Tariff on Indian Goods, Explained
How two US tariffs raised the cost of covered Indian goods in August 2025, who could bear that cost, and why trade at risk is not the same as trade lost.
By Vimista EditorialPublished Updated 7 min read
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Imagine an Indian exporter selling goods to an American buyer for ₹1 lakh. The exporter has not raised the price. Yet the buyer suddenly needs much more money to bring the same goods into the US.
That was the problem created by the August 2025 US tariff changes. For covered Indian goods, two separate 25% duties could add up to 50%. The extra money went to US customs, not to the Indian seller.
How could a tax paid in America put pressure on a business in India? Follow what happened to the buyer’s bill.
A second duty was added to the first
A Customs dutyA customs duty is a tax on imported goods. A high duty makes imports costlier and shields local producers from foreign competition.View topic and related stories, or import tariff, is a tax on goods entering a country. The buyer’s cost can therefore rise even when the seller’s price stays unchanged. A competing product made locally can become more attractive if the imported product becomes more expensive.
The US had already announced a separate tariff programme earlier in the year, calling its duties reciprocal tariffs. Under that programme, a 25% rate applied to covered Indian goods from early August. The April tariff article explains how that programme began.
Then, on 6 August, the US announced another 25% duty on many Indian goods. The order stated that this was a response to India’s purchases of Russian oil. The new charge began on 27 August, subject to exceptions.
The second duty was added to the first. It did not replace it. That is how two measures with different stated purposes could affect the same shipment.
What the “50% tariff” meant for one order
Return to our hypothetical ₹1 lakh shipment. Assume that is its customs value, the value customs uses to calculate the tax, and that both duties apply. US customs would assess the real shipment in dollars; rupees make the example easier to follow.
The first 25% duty adds ₹25,000. The second adds another ₹25,000. Together, they add ₹50,000 to the buyer’s bill.
Both percentages are calculated on the same ₹1 lakh customs value. The second is not calculated on ₹1.25 lakh. The buyer’s cost becomes ₹1.5 lakh before shipping, ordinary product duties and other charges. Those other charges are left out of this example.
The importer of record, the party responsible for declaring the import, pays customs. Suppose that party is the American buyer. The exporter still receives the agreed ₹1 lakh; it does not automatically receive more because the buyer pays more overall.
That gap between the seller’s price and the buyer’s total cost is where the business pressure begins.
Why the Indian seller could still bear the cost
The American buyer now has to decide whether the goods are worth buying at the higher total cost.
It could absorb the extra charge and accept a lower profit. It could raise its own selling price and ask its customers to pay more. Or it could ask the Indian exporter for a discount, reduce the order, or look for another supplier.
If the exporter accepts a lower price while its production costs stay unchanged, its profit falls. It has absorbed part of the tariff’s economic cost even though the American importer pays customs.
If the buyer raises customer prices, customers bear more of the cost. This movement of a higher cost into selling prices is Cost pass-throughA higher input cost can be absorbed in a business’s profit, passed to customers through prices, or shared between them. Contracts, competition and the size of that input affect the result.View topic and related stories. If customers buy less at the higher price, the buyer may reduce its next order from India too. This is how Supply, demand and pricePrices tend to rise when buyers want more than sellers can supply, and fall when supply exceeds demand. For goods like oil, expectations about future supply can move today's price too.View topic and related stories connect: making a product more expensive can reduce the quantity people want to buy.
These are possible responses, not findings about a particular exporter. Which response is feasible depends on contracts, profit margins and alternatives. A buyer that can easily find a cheaper substitute has more room to demand a discount. An exporter whose product is difficult to replace may have more room to hold its price.
So the tariff can affect an Indian business in two different ways: it may earn less on each item, or sell fewer items. To establish what actually happened, we would need evidence about orders, selling prices and costs.
Why every exporter did not face the same bill
The 50% headline did not mean every Indian product faced both charges.
The additional duty had product exceptions, including specified goods covered by other US tariff measures. Qualifying shipments already in transit before the start also had a temporary exception. An exemption from this extra duty did not necessarily remove other duties.
The relevant customs entry date mattered too. Signing a sale agreement before the announcement did not by itself protect the shipment.
That is why two exporters with the same order value could face different treatment. The product’s customs code, the entry date and the applicable exceptions determined the bill. The national headline could not replace those shipment details.
Trade at risk is different from trade already lost
India’s Commerce Ministry assessed the value of exports covered by the tariffs in a parliamentary answer that August. It used the previous year’s trade values and discussed the two tariffs together.
Such an estimate tells us the scale of business exposed to a change. It does not tell us how much business disappeared.
Imagine a company normally sells ₹100 worth of goods into an affected market. All ₹100 of sales may be exposed to the new tariff. But it might keep its orders, accept a discount, lose some customers, or find buyers elsewhere. Exposure is the starting point for asking what could change, not a measure of the eventual loss.
Nor is the value of those sales the amount collected in tax. The duty is calculated separately on the customs value of the shipments to which it applies.
This matters when reading claims about India’s losses. A large amount of trade exposed to tariffs signals that many business relationships may need to adjust. It does not establish an equally large fall in exports, profits or jobs. The parliamentary estimate also did not isolate how much exposure this additional duty created on its own.
This additional duty later ended
A US order removed this specific extra 25% duty for goods entering under the relevant customs rules from 7 February 2026.
Removing that layer did not remove every other US duty on Indian goods. The remaining treatment still depended on the product and the other rules applicable at the time. This is a historical account of the August measure, not a statement of today’s tariff rates.
The episode shows why a tariff has to be followed through the whole transaction. A government adds a charge at the border; the importer pays it; buyers and sellers then decide how much cost they can absorb and whether the trade still makes sense.
What to remember
- The seller’s price and the buyer’s total cost are different. A tariff can raise one without raising the other.
- Separate duties can apply together. Here, two 25% charges on the same customs value added up to 50%, where both applied.
- The first payer need not bear the whole cost. Discounts, customer prices and order volumes can spread the burden.
- Exposed trade is not a measured loss. Actual effects require evidence about what businesses sold and earned.
Sources
Customs treatment may change; check the current rules before relying on the rates discussed here.
Show 7 sources
- The White House, Executive Order 14329, “Addressing Threats to the United States by the Government of the Russian Federation”, 6 August 2025
- US Customs and Border Protection, CSMS #66027027, “Guidance-Additional Duties on Imports from India”, 25 August 2025
- US Customs and Border Protection, CSMS #65829726, “Guidance: Reciprocal Tariff Updates Effective August 7, 2025”, 4 August 2025
- Ministry of Commerce and Industry, Department of Commerce, Lok Sabha Unstarred Question 4301, “US Tariff on India”, answered 19 August 2025
- US International Trade Commission, “What is the Customs Value and how is it computed?”, undated
- US Customs and Border Protection, “Entry Summary and Post-Release Process”, undated
- The White House, Executive Order 14384, “Modifying Duties to Address Threats to the United States by the Government of the Russian Federation”, 6 February 2026