Image used for representative purpose only.
| Photo Credit: RAMAKRISHNA G

Image used for representative purpose only.
| Photo Credit: KK MUSTAFAH

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U.S. President Donald Trump at the White House in Washington, D.C., U.S., on August 7, 2025.
| Photo Credit: Reuters

U.S. President Donald Trump said on Wednesday that he will impose a 100% tariff on computer chips, raising the spectre of higher prices for electronics, autos, household appliances and other essential products dependent on the processors powering the digital age.

“We will be putting a tariff of approximately 100% on chips and semiconductors,” Mr. Trump said in the Oval Office while meeting with Apple CEO Tim Cook. “But if you are building in the United States of America, there is no charge.”

The announcement came more than three months after Mr. Trump temporarily exempted most electronics from his administration’s most onerous tariffs.

The Republican president said companies that make computer chips in the U.S. would be spared the import tax. During the COVID-19 pandemic, a shortage of computer chips increased the price of autos and contributed to higher inflation.

Investors seemed to interpret the potential tariff exemptions as a positive for Apple and other major tech companies that have been making huge financial commitments to manufacture more chips and other components in the U.S.

Big Tech already has made collective commitments to invest about USD 1.5 trillion in the US since Mr. Trump moved back into the White House in January. That figure includes a USD 600 billion promise from Apple after the iPhone maker boosted its commitment by tacking another USD 100 billion on to a previous commitment made in February.

Now the question is whether the deal brokered between Mr. Cook and Mr. Trump will be enough to insulate the millions of iPhones made in China and India from the tariffs that the administration has already imposed and reduce the pressure on the company to raise prices on the new models expected to be unveiled next month.

Wall Street certainly seems to think so. After Apple’s stock price gained 5% in Wednesday regular trading sessions, the shares rose by another 3% in extended trading after Mr. Trump announced some tech companies will not be hit with the latest tariffs while Mr. Cook stood alongside him.

The shares of AI chipmaker Nvidia, which also has recently made big commitments to the U.S., rose slightly in extended trading to add to the USD 1 trillion gain in market value the Silicon Valley company has made since the start of Mr. Trump’s second administration.

The stock price of computer chip pioneer Intel, which has fallen on hard times, also climbed in extended trading.

Inquiries sent to chip makers Nvidia and Intel were not immediately answered. The chip industry’s main trade group, the Semiconductor Industry Association, declined to comment on Mr. Trump’s latest tariffs.

Demand for computer chips has been climbing worldwide, with sales increasing 19.6% in the year-ended in June, according to the World Semiconductor Trade Statistics organisation.

Mr. Trump’s tariff threats mark a significant break from existing plans to revive computer chip production in the U.S. that were drawn up during the administration of President Joe Biden.

Since taking over from Mr. Biden, Mr. Trump has been deploying tariffs to incentivise more domestic production. Essentially, the president is betting that the threat of dramatically-higher chip costs would force most companies to open factories domestically, despite the risk that tariffs could squeeze corporate profits and push up prices for mobile phones, TVs and refrigerators.

By contrast, the bipartisan CHIPS and Science Act that Mr. Biden signed into law in 2022 provided more than USD 50 billion to support new computer chip plants, fund research and train workers for the industry. The mix of funding support, tax credits and other financial incentives were meant to draw in private investment, a strategy that Mr. Trump has vocally opposed.

Published – August 07, 2025 09:03 am IST

The story so far: On July 30, U.S. President Donald Trump announced 25% tariffs on imports from India “plus a penalty”. While this puts to rest months of speculation over what the tariffs would be on Indian imports into the U.S., it opens up fresh uncertainties with respect to a potential bilateral trade agreement between India and the U.S.

What did Mr. Trump announce?

Taking to social media, Mr. Trump cited India’s tariff and non-tariff measures on trade, and its dealing with Russia on energy and military equipment, as the main reasons behind imposing the 25% tariffs and the penalty. There is no clarity yet on what the penalty will look like, but Mr. Trump has in the past threatened a 10% additional tariff on BRICS countries. If this comes to pass, then effective tariffs on Indian imports would be 35%. There is also a legislation in the U.S. in the process of being passed that could see an additional 500% tariff on India, China, and Brazil for their dealings with Russia.

What does it mean for India?

Tariffs are paid by importers. Therefore, tariffs on Indian imports would be paid by those in the U.S. that are importing Indian goods. That is, Indian goods will become more expensive for them. Therein lies the true problem for India.

On a macro level, the tariffs and the impact they will have on Indian exports are expected to only lower India’s GDP by 0.2%, according to research by the Bank of Baroda. So, if India’s growth forecast had been 6.6%, then these tariffs — if they are imposed — could lower growth to 6.4%. However, the issue arises in individual sectors. According to the Bank of Baroda, sectors such as garments, precious stones, auto parts, leather products, and electronics (although their inclusion is uncertain) could face the pinch and would have to rework their strategies. “The issue really is that some of the competing nations like Vietnam (20%), Korea (15%) and Indonesia (19%) have lower tariffs compared with India,” the Bank of Baroda added in its research note.

How did things come to such a pass?

While most trade deals are negotiated over years, Prime Minister Narendra Modi and Mr. Trump in February 2025 announced that they would conclude the first tranche of a trade deal by fall. To put this in perspective, the recently-signed Comprehensive Economic and Trade Agreement between India and the U.K. took about three years to negotiate.

What made the announcement by Mr. Modi and Mr. Trump notable was that it came before the latter’s big moves on reciprocal tariffs, which is what pushed other countries to start negotiating with the U.S. The announcement was thus a strong and positive commitment towards strengthening ties between the two countries. But then, on April 2, Mr. Trump announced his Liberation Day reciprocal tariffs. These included a 10% baseline tariff for all countries, and additional tariffs on a country-by-country case. For India, this total was 26%. However, just a week later, Mr. Trump announced a 90-day pause on these tariffs so that bilateral deals could be struck so as to reduce the U.S.’s trade deficit with most of its trading partners. The 90-day pause was to end in July, but Mr. Trump extended it to August 1.

What are the points of friction?

It’s hard to pinpoint any single recent development that has soured relations, but there have been several points of friction between the two countries in the past few months. The matter of India’s tariffs and non-tariff barriers has been something Mr. Trump has been highlighting since his first term as President. It was no surprise that he would take up the issue in his second term.

​Soured relations: The Hindu editorial on Trump’s 25% tariff, ‘penalty’

Mr. Trump has brought up India’s engagement with Russia, too, saying countries like India are partly financing Russia’s war with Ukraine. India, however, has reiterated that it will secure its national and energy security, and if that means buying cheap Russian oil, then that is what it would do. Russia currently accounts for about 35-40% of India’s oil imports, making it a significant partner. In addition, India has remained adamant about keeping core parts of its agriculture and dairy sectors out of trade deals, including with the U.S. This has upset negotiators on the U.S. side, but it is a ‘red line’ India will not cross. Opening up these sectors would expose India’s relatively low-productivity farmers to global competition, which will likely have devastating impacts on their livelihoods.

Then, there is the fact that Mr. Trump has repeatedly stated that it was him, and his trade talks, that encouraged India and Pakistan to agree to a ceasefire following the launch of Operation Sindoor by India. The fact that the Indian government has refuted it has only further angered Mr. Trump. Mr. Trump’s claims have irked the Indian establishment as well, since it has provided the Opposition a means to attack the government.

India has informed the World Trade Organization that it reserves the right to impose additional tariffs on imports from the U.S. to retaliate against its higher tariffs on items like steel, aluminium, and automobiles.

Taking these things together, Mr. Trump’s tariff announcement comes as a confirmation that at least one, if not all of these factors, worked toward souring relations.

Will India continue paying these tariffs?

Although there has been a lot of talk about a ‘mini-deal’ between India and the U.S. to walk back the reciprocal tariffs, Indian officials have been cagey about the date for such a deal. The tariff announcement by Mr. Trump confirms that such a deal is not coming.

However, the two sides have been remarkably consistent about their commitment of having some sort of trade deal finalised by the fall 2025 deadline. So far, negotiators from the two sides have met in New Delhi and Washington five times, including the first meeting in March where the Terms of Reference for the negotiations were finalised. The team from the U.S. will visit India in late August to take forward the talks. Things have, however, become trickier for Indian negotiators because Mr. Trump has now directly linked India’s dealings with Russia to India’s trade relationship with the U.S.

The tariffs will come into effect soon. According to an Executive Order dated July 31, Mr. Trump said that his duties on India and other countries would come into effect “7 days after the date of this order”.

What about deals with other countries?

Over the last month, Mr. Trump has concluded deals with the U.K., Indonesia, the Philippines, Japan, the EU, and South Korea. The deal with the U.K. does not specify a general tariff level, but it will see British car exports to the U.S. attract a 10% tariff, down from the earlier 27.5% and a removal of tariffs on aerospace exports to the U.S. Japan negotiated lower tariffs of 15% for its exports to the U.S., the same as the EU.

Published – August 03, 2025 02:50 am IST

File picture of U.S. President Donald Trump
| Photo Credit: Reuters

India should respond with equal measures if the newly elected U.S. President Donald Trump imposes higher tariffs on domestic goods, trade experts say.

They noted that India has previously implemented retaliatory customs duties on several U.S. products, such as apples, in response to what it deemed “illegal” tariffs imposed by America on certain steel and aluminium products.

In December last year, Mr. Trump has said India charges “a lot” of tariffs, reiterating his intention to impose reciprocal tariffs in retaliation for what New Delhi will impose on the import of certain American products.

“India should respond firmly and in equal measures,” economic think tank Global Trade Research Initiative (GTRI) Founder Ajay Srivastava said.

In 2018, when the U.S. taxed Indian steel and aluminium, India retaliated by raising tariffs on 29 U.S. products, recovering equivalent revenue.

“This measured response showed India’s capability to protect its trade interests while staying balanced,” Mr. Srivastava said.

He added that Indian exporters may face high customs duties for goods like automobiles, textiles and pharmaceuticals if the new U.S. administration decides to pursue the ‘America First’ agenda.

He also said that if Mr. Trump would tighten H-1B visa rules, it may impact the growth of Indian IT firms.

Over 80% of India’s IT export earnings come from the U.S. The U.S. is India’s largest trading partner, accounting for over $190 billion of annual trade.

Sharing similar views, international trade expert Abhijit Das said that additional duties by the U.S., if implemented, will lock the market for Indian goods.

“Of course, India should retaliate with equal measures,” Mr. Das said, adding that imposing retaliatory customs duties would strengthen India’s position in negotiating the removal of “illegal” tariffs in the future.

“In the case of imposition of duties by the U.S., India should explain why those are illegal and if not withdrawn, we should not hesitate in taking retaliatory measures,” he said adding Mr. Trump has complaints in several sectors like agri goods, industrial products, services, intellectual property rights and digital trade.

Consult stakeholders

Another expert said that the Indian government should do a comprehensive consultation with the stakeholders and prepare itself to deal with any such move by the new American authorities.

Trade experts further stated that Mr. Trump’s claim that India is an “abuser” of import tariffs is unfair as many nations including America protect their domestic industries by imposing high customs duties on certain products. In October 2020 also, Mr. Trump labelled India as the ‘tariff king’.

According to WTO’s World Tariff Profiles 2023, the U.S. also imposes high duties on items like dairy products (188%), fruits and vegetables (132%), coffee, tea, cocoa and spices (53%), cereals and food preparations (193%), oilseeds, fats and oils (164%), beverages and tobacco (150%), fish and fish products (35%), minerals and metals (187%), and chemicals (56%).

International trade expert Biswajit Dhar also said that Trump would increase tariffs in various sectors as he has to follow his call for MAGA (Make America Great Again).

“India has a trade surplus with the US and they have flagged this issue earlier several times. We have always favoured consultations, we have not done things unilaterally. But if things do not work out, we should also consider proportionate measures,” Mr. Dhar said.

However, certain exporters are of the view that Mr. Trump will not go ahead with its threat as a number of U.S. companies have shown interest to invest in India and any move to impose duties will impact them also.

“I think, India-US trade relations will be strengthened further,” Federation of Indian Export Organisations (FIEO) President Ashwani Kumar said.

The exporters added that in fact, India will get an opportunity to increase exports to the U.S. if America would impose higher duties on Chinese goods.

Going by the data, during 2001-23, at a Compounded Annual Growth Rate (CAGR), India’s exports to America rose by 10.48%. In this period, the US imports from the world have grown by 4.76 per cent.

They added that the two economies have strongly integrated with each other through various agreements, including the IPEF (Indo-Pacific Economic Framework for Prosperity) and other bilateral mechanisms.

The U.S. is the largest trading partner of India in 2023-24. India’s exports stood at $77.51 billion, while imports aggregated at $42.2 billion in the last fiscal.

During April-December this fiscal, the country’s exports to America rose by 5.57% to about $60 billion, while imports grew by about 2% to $33.4 billion.