One Year of Trump Tariffs: All You Need to Know About Its Impact on India and the U.S.

What started as a trade policy announcement became one of the most disruptive economic events of recent times.

On April 2, 2025, the President of the United States, Donald Trump, came out into the White House Rose Garden holding a huge chart, and declared what he named "Liberation Day." On that day, he unveiled import tariffs on almost all countries that trade with the United States. In essence, he was telling everyone that the United States was done opening up its doors freely to other nations. Nations should now pay in order for their products to reach the market in the United States.

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In no time, financial markets were affected by this declaration. After one year, the situation can be summarized as follows. Some objectives set out to be achieved through imposing tariffs on other nations have not been met yet. Other consequences that could not have been foreseen have emerged.

How It All Started

In the period between January and April of 2025, the aggregate effective average tariff rate in the United States shot up from roughly 2.5% to 27%, the highest in over a hundred years. Using his emergency powers under the IEEPA, Trump pushed tariffs up to such heights without having to go through the normal procedures set by Congress.

Only seven days into Liberation Day, Trump did an about-turn by suspending the majority of the tariffs for ninety days, leaving China's at 125%. Over the years, numerous pauses, exceptions, and new additions followed. During the year, there were more than fifty changes in the U.S.'s tariff policy, including increasing tariffs, lowering tariffs, adding products, and removing products. The average effective tariff rate for the whole year of 2025 was 7.7%. This is a dramatic increase from the previous year's rate of 2.4%, which was already the highest since 1947. Most of the peak tariffs had been subsequently suspended, renegotiated, or invalidated by the courts.

By February 2026, the Supreme Court had declared that most of Trump's emergency tariffs were unconstitutional, initiating the long, complicated, and precedent-setting process of refunding the affected importers.

Impact of Tariff on the United States

The stated goals of the tariffs were to reduce the trade deficit, bring manufacturing jobs back to America, raise government revenue, and lower prices for consumers. One year in, most of those goals remain unfulfilled.

On the trade deficit: Imports of goods in 2025 totaled $3.4 trillion, up 4% from 2024, while the total goods trade deficit rose about 2% to $1.24 trillion. The deficit got larger, not smaller.

On manufacturing jobs: There was a decline of about 100,000 manufacturing jobs in the U.S. in 2025, rather than the boom that was promised. Automation and an ageing workforce also played a role, but the promised factory revival did not arrive.

On Consumers: One of the most debated questions around tariffs is to what extent they are leading to higher consumer prices. Tariffs are taxes that add to the cost of imported goods. Different groups can bear this cost, or incidence: foreign producers (in the form of accepting lower prices on their exports), American importers and businesses (in the form of lower profit margins), and American consumers (in the form of lower real after-tax incomes). Moreover, tariffs reduce productivity and thereby real U.S. income (even when including tariff revenue) by reducing the efficiency of resource allocation across countries and increasing the marginal cost of investment. After-tax real incomes in turn can fall either from a rise in realised prices, holding nominal income constant, or a fall in nominal income.

On revenue: In the first five months of the fiscal year, the government raised $151 billion from tariffs, nearly four times as much as during the same period the previous year. But the Supreme Court ruled that Trump had overstepped his authority with some of the tariffs, and about half of the total tariff revenue will now have to be refunded.

Industries like retail, automotive, and consumer goods felt the pressure most. Around 80% to 85% of the costs were absorbed domestically, meaning either U.S. corporations had to take the hit, or they passed it on to customers, or a mix of both.

Effects of Trump’s Tariffs on India

In the case of India, Trump’s tariffs have proven especially disruptive, and not solely due to trade figures alone.

While the first tariff on India occurred during the general announcement of the Liberation Day in April 2025, the situation became especially serious in August, when the Trump administration focused on India’s energy policy. In the end, the Trump administration placed massive tariffs on India’s export products, starting with a 25% reciprocal tariff, then adding another 25% as punishment for importing Russian oil, thus increasing the tariff rate to a whopping 50%, one of the highest levied on any trading nation.

India has estimated the tariffs affected $48.2 billion of exports. Officials claimed the tariffs would make exports to America unprofitable, leading to job cuts and reduced economic activity.

Indian Sectors Impacted by Trump’s Tariff

The sectors hit hardest were labour-intensive ones. The textile industry, gems and jewelry, leather, food, and automobile manufacturers suffered greatly, with Indian exporters in these sectors experiencing a drastic reduction in orders from the US market.

Pharmaceuticals, however, did not feel the effects. The Indian pharmaceutical sector was not subject to a sudden increase in tariffs, as the US relied heavily on Indian pharmaceutical companies' generic medications to make healthcare affordable for its population. India provided almost half of America's generic medications.

India retaliated without being too aggressive. Prime Minister Modi made it known that farmers, local enterprises, and dairy producers in India's interests could not be compromised. India's effort to diversify into other export markets bore fruits with India exporting goods worth $38.13 billion in November 2025.

The tariff situation, however, also presented opportunities for China, as the US levied higher tariffs on Indian exporters compared to many Southeast Asian exporters, limiting the extent of attracting manufacturing away from China.

By February 2026, there was some easing. Trump cut tariffs on Indian exports from 50% to 18% after several Indian oil companies agreed to stop buying Russian oil unless absolutely necessary. Trade negotiations continued, though no comprehensive deal has been signed yet.

Current Scenario

A year after Liberation Day, the global trading system looks different from what it did before April 2025. The government made only a few trade deals in the following year, and people in the U.S. often faced the side effects of those decisions.

For India, the episode has accelerated a push towards diversifying trade partners. The India–EU Free Trade Agreement (FTA) concluded in the month of January, and India has been more open to bilateral agreements than it had been in years past.

For the United States, the full picture is still forming. Some tariffs remain. Others are being refunded. Legal battles continue. And businesses that spent 2025 reshaping their supply chains are now watching closely to see which version of trade policy will be the one that sticks.