Citing India's higher tariffs on American goods, US President Donald Trump has declared a 25 per cent tariff on Indian imports. However, shipments worth over $25 billion, primarily of smartphones and pharmaceuticals, are currently exempted from these higher tariffs.

Pharmaceuticals and electronics (primarily smartphones) accounted for $10.5 billion and $14.6 billion of India's total exports to the US in FY25, respectively.

Trump has not yet included these key industries in the new tariffs that are slated to come into effect from August 1.

India's exports to the US have increased since January this year, as a result of this exemption because there are no duties on these goods.

From January to June 2025, the US's percentage of India's merchandise exports increased from 17-18 per cent to over 20 per cent.

This growth reflects front-loading by exporters ahead of the tariff hike in August and the tariff exemptions on smartphones and drugs, which were spared from the 10 per cent baseline duty introduced in April, according to industry experts.

Although India's total exports grew less than 2 per cent in Q1 FY26 and contracted more than 4 per cent in Q4 FY25, according to Commerce Ministry data, exports to the US made up roughly 23 per cent of India's total shipments in the June quarter of FY26 and the first quarter of FY25.

However, there are still risks because Trump has threatened to impose tariffs of up to 200 per cent on drugs made abroad, and depending on future US decisions, smartphone exemptions might also be removed.

The US President has not yet clarified the penalties associated with India's energy and arms purchases from Russia, but the country's $4.09 billion petroleum exports to the US are currently safe because energy is exempt from tariffs.

India's exports to the US totalled $25.52 billion in Q1 FY26, an increase of almost 23 per cent from the previous year. For the quarter, total trade was $32.41 billion, and for FY25, it exceeded $86 billion, as per commerce ministry data.

Trump attributed the tariffs in part to India's membership in the BRICS and its ties to Russia.