Gift Nifty plunges over 170 points after Trump announces 25% tariff on India

Gift Nifty fell sharply to 24,680, declining by 0.70% or 174 on Wednesday reacting to US President Donald Trump's announcement that India will pay 25% tariff along with a penalty in the wake of India's trade with Russia.

The tariff announcement was made by Trump on his Truth Social handle and the post said that the tariff and penalty becomes effective from August 1.

"India will therefore be paying a tariff of 25%, plus a penalty for the above, starting on August 1st. Thank you for your attention to this matter," the two-time president said.

Trump slammed India for its long-standing trade practices and foreign policy alignments, particularly its close ties with Russia.


"Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non-monetary Trade Barriers of any Country. Also, they have always bought a vast majority of their military equipment from Russia, and are Russia's largest buyer of ENERGY, along with China, at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE - ALL THINGS NOT GOOD! INDIA WILL THEREFORE BE PAYING A TARIFF OF 25%, PLUS A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST. THANK YOU FOR YOUR ATTENTION TO THIS MATTER. MAGA!," Trump said.

Speaking to reporters aboard Air Force One, he reiterated his view that India's tariff regime has historically been unfair but noted, “I think the trade deals are working out very well. Hopefully for everybody, but for the United States, they're very, very good.”

On the Indian side, officials have sought to downplay tensions, projecting confidence in the negotiation process.

India is yet to finalise a comprehensive bilateral agreement with the US which India plans to close by September or October according to media reports. A U.S. delegation visit is expected in mid-August.

Quoting Indian officials, Reuters reported that the Talks are progressing well with the US and a delegation is expected in Delhi by mid-August. The report published on Tuesday had said that India was expecting imposition of 20 or 25% duty by Trump in the "worst-case scenario".

"However, we assume it would be a temporary measure, considering the five rounds of trade talks that have taken place. A deal will soon be worked out,” Reuters said, citing the official.

Expert Views

"Markets will react negatively to the imposition of tarrif on India. Despite the unpredictable policy making of US, market was expecting a tarriff deal to work out as longer term US India strategic interests are aligned," said Nilesh Shah, MD Kotak Mahindra AMC.

"Markets will hope for a “TACO” trade if better senses prevail. China is defying US / UN sanction on Iran Oil, Myanmar and Russia Trade and North Korea Support. Size and the competitiveness of the economy has its advantages. I hope and pray that this unilateral imposition should accelerate Indian policy making to be growth supportive. Our biggest deterrence continue to remain GDP size and competitiveness," Shah said.

"The 25% tariff rate is certainly a negative development as it compares to lower rate for peers such as Vietnam, Indonesia and Philippines which compete with India in a similar category of labour-intensive products and electronic goods. The currency market had clearly priced this eventually as the USDINR pair moved by more than 70 paise today. The exact details of the tariffs on the exempted items such as pharma and the ones that were charged at a differential rate such as iron, steel and auto is unknown as of now, but inclusion of pharma into tariffs should be incremental negative for India’s exports as US accounts for more than 30% of India’s pharma exports. If no deal is signed by Sept-October, we see a downside to full year GDP growth estimate for India by 20 bps," said Garima Kapoor, Economist and Executive Vice President, Elara Capital.

"On the positive side, it is pertinent to note that any hotchpotch deal which would have compelled India to give concessions to its agriculture and dairy sector may have had much deeper ramifications politically, socially, and eventually on livelihoods . A well negotiated deal that addresses all aspects of trade, investment and tariff and non- tariff barriers by September October 2025 is likely to yield long term benefits than a hurried deal. The India-UK deal template which gave concessions to auto and opened public procurement sector has shown that India is willing to shed its protectionist tag in sectors where it doesn’t impact the marginal producer, which is a huge departure from its earlier stance," Kapoor said.