India Forms Task Force to Tackle US Tariff Impact on Exports

Government Establishes Special Working Group to Assess US Tariff Implications for Indian Exports

The Government of India has constituted a high-level special working group under the Ministry of Commerce and Industry to assess the potential implications of newly announced United States tariffs and related penalties on Indian exports. This development arises in response to recent policy changes from the US administration, which include a significant 25 percent tariff on Indian goods and added penalties linked to India’s ongoing defence and energy imports from the Russian Federation.

Context of the US Tariff Announcement

On July 31, US President Donald Trump’s administration declared that, starting August 1, 2025, Indian goods would face an immediate 25 percent tariff when imported into the United States. In addition to these increased tariffs, the US also announced an additional penalty specifically targeted at nations, including India, that continue to procure energy and defence equipment from Russia. The tariffs were communicated as part of broader US efforts to address perceived non-monetary trade barriers and realign trading relationships with key partners, after separate agreements with the European Union and Japan introduced lower tariffs for those developed economies.

According to the US administration, these measures are intended to counter what Washington has termed “the most strenuous and obnoxious non-monetary Trade Barriers of any Country,” referencing Indian regulatory practices. The stated objective from the US side is to encourage more balanced bilateral trade and to influence India’s strategic supply chain decisions regarding Russia.

Formation and Mandate of the Working Group

The Ministry of Commerce and Industry promptly responded to the US announcement by establishing a dedicated working group comprising senior trade officials, economic advisors, and legal experts. The group has been empowered to:

• Conduct a comprehensive sector-wise analysis of export categories most exposed to the new US tariffs, with a particular focus on textiles, pharmaceuticals, engineering goods, and agricultural products.
• Evaluate the expected economic impact, including possible loss of market access, price disadvantages, and disruption to long-term export contracts.
• Study the implications of the additional penalties associated with defence and energy imports from Russia, especially for India’s privatised and state-controlled entities operating in these sectors.
• Initiate consultations with export promotion councils, industry chambers, and impacted stakeholders to develop detailed representations on mitigation policies.
• Coordinate with the Ministry of External Affairs and other departments engaged in international negotiations to explore remedial diplomatic measures and trade dispute mechanisms under the World Trade Organization framework.

Potential Economic Impact and Administrative Challenges

Preliminary assessments from multiple economic research groups, aligned with early reactions from the government, indicate that the new US tariffs could subtract approximately 20 to 40 basis points from India’s current fiscal GDP growth, depending on the duration and coverage of the US measures. Economists estimate that India’s GDP growth could slip below the 6 percent threshold for FY 2025-26 if the imposed tariffs remain in place for the entire year. Current forecasts range from 6.1 percent, lower than both the Reserve Bank of India’s estimate of 6.5 percent and the Ministry of Finance’s projection of 6.3-6.8 percent.

High-frequency government data show that the United States remains India’s single largest export destination for merchandise goods, with an aggregate value exceeding USD 80 billion annually. Sectors such as information technology services, apparel, engineered products, pharmaceuticals, and agricultural commodities—particularly basmati rice and marine products—are considered most vulnerable to price shifts caused by additional import duties.

Administrative officials caution that the additional penalties linked to procurement of defence and energy equipment from Russia introduce further complexity, particularly as many key Indian defence deals and civilian nuclear agreements involve Russian-origin technologies. The penalties could potentially impact not just direct trade accounts, but also the insurance, shipping, and financing arrangements associated with bilateral projects in these sectors.

Government Statements and Strategic Response

In an official briefing from the Ministry of Commerce and Industry, a spokesperson reaffirmed the government’s commitment to safeguarding the interests of vulnerable segments of the Indian economy. The Ministry emphasised ongoing negotiations aimed at securing exceptions and adjustments to the US measures, with a stated policy focus on ensuring the welfare of Indian farmers, Micro, Small and Medium Enterprises (MSMEs), and manufacturing entities.

"The Government of India is actively studying the latest US announcement on tariffs and penalties. Our priority remains to protect the welfare of farmers, MSMEs, and the Indian manufacturing sector through robust trade negotiations and necessary administrative measures. We reaffirm our commitment to arrive at a fair, balanced, and mutually beneficial trade agreement with our partners worldwide."

The Ministry has announced that all export promotion councils and sectoral industry associations are being closely consulted as part of the working group’s ongoing assessment. Special attention will be given to export contracts scheduled for the August–December shipment window, with an eye on minimizing price escalations for buyers and shielding Indian producers from short-term shocks.

Ongoing Trade Negotiations and Safety Nets

Officials from the Directorate General of Foreign Trade stated that the government is working on a multi-pronged approach. This includes:

• Reviewing and, where possible, recalibrating export incentives for sectors hit hardest by the US tariffs.
• Enhancing export credit insurance and liquidity support for smaller enterprises likely to experience contract cancellations or lower order volumes due to the altered US tariff regime.
• Initiating accelerated discussions within existing bilateral and multilateral trade frameworks to seek temporary waivers or relief mechanisms during the US-India trade negotiations.
• Coordinating with Indian missions in Washington D.C. and other major American cities to support exporters in renegotiating delivery terms and pricing with US importers.

The working group is expected to submit its findings and preliminary recommendations to the Commerce Minister within two weeks. Depending on the outcome, officials have not ruled out the possibility of approaching the World Trade Organization dispute settlement mechanism should talks with the US fail to resolve market access and penalty issues amicably.

Sectoral Exposure and Impact Assessment

Initial analysis identifies the following as the sectors likely to be most impacted in both direct and indirect terms:

• Textiles and Apparels – Considered highly price-sensitive, with a large share of shipments to US markets; increased costs may erode competitiveness against rivals from Bangladesh and Vietnam.
• Pharmaceuticals – India is a leading supplier of generic medicines to the US; additional tariffs may impact both margins and consumer pricing in sensitive drug categories.
• Auto Components and Engineering Goods – Complex supply chains expose these sectors to cumulative costs, given dependency on both US and Russian technical inputs.
• Agricultural Products – Farm exports, especially rice, spices, and marine produce, are vulnerable to sudden price hikes which could affect shipment volumes and incomes for small farmers and cooperatives.

Industry stakeholders have welcomed the timely formation of the government’s working group, noting that the scale and unpredictability of the penalties tied to Russian imports have added complexity to longstanding business relationships. Exporters are also monitoring potential secondary impacts across logistics, currency risk management, and compliance overheads linked to customs paperwork and new anti-circumvention rules.

Coordination with Other Government Agencies and External Partners

The Ministry of Commerce and Industry is coordinating efforts with the Ministry of External Affairs, the Department of Revenue, and the Ministry of Defence. This inter-ministerial engagement is seen as crucial to ensuring cohesive strategies, especially with the additional penalty clauses targeting critical imports from Russia.

Recognising the strategic importance of India’s relationship with both the United States and Russia, diplomatic channels have been activated to clarify India’s stance on its sovereign rights to pursue independent trade and security partnerships. The government has conveyed these positions to US officials in recent meetings and has reiterated India’s preference for engagement over escalation.

From the external trade perspective, the Indian missions in the United States are providing continuous updates to exporters, addressing operational queries, and facilitating dialogue between US importers and Indian exporters wherever delivery terms or prices may be renegotiated due to the new tariff environment.

Long-term Strategic Considerations

Senior officials have pointed out that the sudden escalation of tariffs on Indian goods comes at a time of ongoing structural transformation in the Indian export ecosystem, with numerous companies realigning supply chains, upgrading quality controls, and exploring alternative markets in Europe, the Middle East, and Africa. Nevertheless, the United States remains irreplaceable as a high-value, technologically advanced export destination for many Indian industries.

Government analysts and external economists have cautioned that the current cycle of tariff escalation could lead to long-term repositioning of global trade flows, particularly if Indian products lose preferential access in key sectors. The need to accelerate export diversification, develop domestic capacities, and intensify trade diplomacy is seen as more urgent than ever, given rising global protectionism and interlinked geopolitical factors.

Next Steps and Public Communication

The Ministry of Commerce and Industry will publish periodic bulletins summarizing key findings of the working group and the outcome of ongoing negotiations with the US. In addition, exporters, industry groups, and state development boards will be provided with detailed advisories on market risks, logistics planning, and alternative financing options for business continuity during the adjustment period.

The first progress report from the working group is expected by mid-August. It will include a detailed impact matrix for each exposed sector and preliminary recommendations for both trade policy adjustments and support measures for affected exporters. Responsibility for final arbitration or escalation, if required, rests with the Union Cabinet, based on the consensus developed from technical consultations and diplomatic outreach.

Conclusion

The Indian government’s prompt creation of a special working group underscores the seriousness with which it is approaching the latest changes in the global trading environment. By coordinating with affected sectors, maintaining transparent communication, and reaffirming its commitment to balanced negotiations, the administration seeks to protect the interests of farmers, MSMEs, and manufacturing enterprises. The coming weeks will be pivotal as India engages in high-level dialogues to safeguard its economic resilience and trade competitiveness in the face of evolving US tariff policies and geopolitical considerations.