The United States has recently imposed an additional 25% ad valorem tariff on Indian imports, raising the total tariff to 50%. Positioned as a “penalty” for India’s continued trade in Russian oil, this measure marks a shift from purely reciprocal trade action to an instrument of foreign policy enforcement. In this article, we discuss the key features of the new order, its commercial and compliance implications for Indian exporters, and the steps businesses can take to manage legal and operational risks in light of these developments.
On August 6, 2025, the U.S. President Donald Trump signed an executive order under the International Emergency Economic Powers Act (IEEPA) and related statutes, imposing an additional ad valorem tariff of 25% on all goods imported from Indian[1]. This order follows closely on the heels of a 25% reciprocal tariff imposed on July 31, 2025[2], raising the cumulative U.S. import duty on Indian products to a sharp 50%, unless exemptions apply.
While announcing the earlier 25% tariff on social media, President Trump had hinted that India would face a ‘penalty’ if it continued to trade with Russia. The United States has justified the additional 25% tariff by stating that India has been “directly or indirectly importing Russian Federation oil”, which according to the executive order enables the Russian government’s war effort in Ukraine. The President determined that the tariffs under prior executive orders were insufficient to address the ongoing national emergency and that this step was “necessary and appropriate”.
Key Dates and Scope to Note
- The July 31, 2025, executive order had introduced a 25% reciprocal tariff on Indian goods, effective August 7, 2025.
- The August 6, 2025, executive order has introduced an additional 25% duty, effective August 27, 2025, three weeks from the date of issuance.
- Importantly, goods that have been loaded onto vessels prior to August 27, or entered into U.S. for consumption or withdrawn from a warehouse for consumption before September 17, 2025, will continue to remain exempt from the new 25% duty.
- The additional tariff applies in addition to existing duties under the reciprocal tariff order, except for products excluded under Annex II[3] of the April 2, 2025, executive order (E.O. 14257), which covers goods such as pharmaceuticals, semiconductors, and certain energy and electronic products.
- Shipments already in transit, commenced before August 27, 2025, will be exempt from the additional 25% duty, provided they enter the U.S. customs before September 17, 2025.
- Goods already in transit, commenced before August 7, 2025, will be exempt from the original 25% tariff, as long as they enter the US for consumption, or are withdrawn from warehouse for consumption before October 5, 2025.
Moreover, the executive order now empowers the Secretaries of Commerce, State, and Treasury to monitor other countries purchasing Russian oil and to recommend similar tariff measures where warranted.
What This Means for Indian Businesses
The immediate impact of this second tariff is significant. For exporters of goods such as apparel, footwear, gems and jewellery, and leather goods, which already face tight margins, this escalation to a 50% effective tariff significantly impedes access to the U.S. market.
Companies supplying goods falling under Annex II remain unaffected by the additional duty and may potentially shift their product offerings or classifications accordingly. At the same time, exporters must be mindful that the executive order could be modified, depending on retaliation or changes in policy circumstances.
Key Actionables for Businesses
Given the compressed timeline and high stakes, Indian businesses should prioritise the following:
- Shipment Mapping and Logistics Coordination: Immediate communication with shipping and customs partners is essential to determine which consignments qualify for transit exemptions. Where feasible, expedite customs entry or withdrawals to avoid the August 27 duty deadline.
- Be Cautious about Under Invoicing: Any deliberate understatement of the value of goods to reduce tariff liability can expose the Indian exporter to liability under the U.S. False Claims Act (FCA). The FCA allows not only the U.S. Government to recover funds, but also private third parties as whistleblowers, to initiate actions for fraud against the U.S. Government.
- Classification and Exemption Analysis: Carefully examine whether any affected goods qualify under Annex II exemptions. If so, ensure that tariff codes, invoice wording, and customs declarations accurately reflect their exempt status.
- Contract Review and Buyer Dialogue: Existing contracts should be revisited for terms related to tariffs, pricing, and delivery timelines. Early dialogue with U.S. buyers will be crucial to negotiate cost-sharing or adjustments and to maintain transparency.
- Explore Diversification or Reshoring Strategies: The spike in duty may prompt businesses to explore alternative markets or production strategies, potentially leveraging manufacturing hubs that enjoy lower U.S. tariff exposure.
- Maintain Vigilance on Policy Developments: Given the order’s provision for monitoring and expansion of tariffs to other countries, exporters must monitor policy channels, agency guidance, and any WTO implications closely.
Broader Implications
This executive order exemplifies a strategic shift, using trade tools to enforce foreign policy positions. While previous tariffs were primarily framed within the contours of trade fairness or security narratives, this action ties trade penalties directly to energy sourcing behaviour. For Indian exporters, it signals a more transactional and less predictable trade environment where diplomatic or policy motivations intersect with commerce.
By emphasising that the tariff is not merely punitive, but part of a broader emergency response, the U.S. underscores that trade repercussions may follow energy and strategic alignments. As such, the new tariff regime demands vigilance, swift action, and adaptive legal and operational strategies.
[1] Addressing Threats to The United States by the Government of the Russian Federation – The White House.
[2] U.S. Tariff and Sanctions Actions Target Indian Trade: Key Considerations for Businesses | Dispute Resolution Blog.
