What are tariffs, why countries use them and what does 25% of Trump’s levy mean on India. Sensible news

Last update:31 July, 2025, 09:10 IST

India joined the growing list of nations facing Trump’s trade measures. What are tariffs here, how they apply, it has a breakdown, and why do countries use as a tool of power.

US President Donald Trump has announced that A 25 percent tariff Will be imposed on Indian imports From 1 August, with an additional unspecified punishment. The move has begun extensive debate on trade wars and tariffs, and how they affect global commerce.

In a post on his platform Truth Social, Trump wrote, “India is our friend, but we … they have a relatively low business because their tariffs are very much … and they have the most loud and unpleasant non -existing trade obstacles in any country.”

He also cited India’s military and energy relations with Russia, saying, “They have always bought a vast majority of their military equipment from Russia, and are Russia’s largest energy buyers, with China, at a time when everyone wants Russia to stop the murder in Ukraine – not all things are good!”

“India will therefore pay a tariff of 25%, as well as a fine for the above, first will start from August,” he concluded.

With this, India joined the growing list of target countries by Trump Administration Trade workIncluding China, Canada, European Union and Mexico. But what are really tariffs, and how do they work?

What are tariffs?

Tariffs are tax levied on goods and services imported from other countries. When the goods cross the border, the importers paid them to their government.

The tariff is usually calculated as a percentage of the price of the product, a format known as an advertising velorm tariff. For example, 10 percent tariff on a product of Rs 1,000 means that an importer will have to pay Rs 100 in tax.

Some tariffs are specific, which, regardless of its price, is charged as a flat amount per unit of the item. Other compounds are tariffs, which connect both.

How do tariffs work?

When a product is imported, the US customs and border security (CBP), or the relevant authority in any country collects tariffs at the point of admission, whether it is from sea, air or land.

In the US, objects are classified using the international harmonized system, which provides them code to determine the applied tariff rates. The collected money goes to the general fund of the Treasury.

Importers often passed the cost to businesses or consumers, increasing the final price of goods. Sometimes, companies absorb the cost of the cost, or even transfer production to the country importing to avoid levy.

What is a mutual tariff?

Earlier in April, Trump announced a 26 percent tariff on Indian goods, which he described as a “concessional mutual tariff”. It was part of the broad slate of trade measures targeting major partners, including China and the European Union.

A mutual tariff occurs when one country matches the import tax and the other imposes on its goods.

For example, if the country A Country A Country imposes 15 percent tariff on products from B, the country can retaliate by imposing equal rates on imports from B Country A.

Reciprocal tariffs are often implicated as corrective action that a country sees in the form of unfair or unilateral trade words.

Why do the countries impose tariffs?

Countries use tariffs for many reasons:

• Protect domestic industries: By making foreign goods more expensive, tariffs help local producers to compete more effectively.
• Increase revenue: Tariffs are a source of government income, especially in countries where domestic taxation is limited.
• Correct trade imbalance: Tariff is used to reduce trade deficit, when a country imports more than imports, by discouraging imports and encouraging domestic options.

In the case of Trump, tariffs are also being used as a leverage to push business partners towards political or strategic concessions. For example, in previous examples, he added tariff waves to control the flow of drug and immigration, or resolved the war in Ukraine in terms of trade associated with Russia.

Who pays for the tariff?

Technically, importing businesses pay tariffs at the time of entering the country. However, these businesses often pass costs on consumers, leading to high retail prices.

In some cases, exporters may reduce their prices to remain competitive despite tariffs. But over time, the burden affects consumers, manufacturers and even jobs, especially in industries that rely too much on imports.

For example, as mentioned by MentorUS bank JP Morgan estimated that 25 percent of tariffs could increase the price of the new car to $ 4,000. It is particularly relevant in the automobile sector, where components such as engines and broadcasting can cross the boundaries several times before the final assembly, each cost that is ultimately reflected in the final price.

Do tariffs apply only to finished goods?

No. Tariffs can also be applied to raw materials and intermediate goods. It is particularly impressive in global supply chains. For example, parts of the car can cross the US-Maxico or US-Canada boundaries seven or eight times during production. In each stage, tariffs increase the final cost of the final product.

What are non-tariff barriers?

In addition to tariffs, countries often use non-monetary trade restrictions, which are usually referred to as non-tariff barriers (NTBs), so that they can control the volume, quality, or type of goods entering their markets. Although these are not taxes, they can significantly affect business to make imports more difficult or expensive.

Normal types of non-tariff barriers include:

• Import quota: The limit on the amount of specific items that can be imported during a given deadline.
• Licensing requirements: Importers need to obtain special permissions or approval before bringing the rules into some goods.
• Safety and Technical Standards: Regulations that determine specification products, before allowing in the country, should often be found on the basis of health, safety or environmental ideas.
• Customs procedures and limits check: complex documentation procedures, delays at entry points, and administrative red tapes that can increase cost and time for importers.

These measures can act as indirect obstacles to trade, even if a direct tax is levied. They can serve legitimate objectives such as consumer safety or environmental protection, but are sometimes criticized for having a conservationist equipment in disguise.

Trump has accused India of having some of the “most rigid and unpleasant” non-monarchy business obstacles globally.

How are tariffs applied?

In the United States, tariffs are applied to enter over 300 ports by the US Customs and Border Security (CBP), including airports, ports and land crossings. Importing businesses should make correct declaration:

• Value of goods
• Their classification under international coordination system
• origin country

Tariffs are collected during custom clearance, and funds go to the General Fund of the US Treasury. If business product details incorrectly either accidentally or intentionally, they can withstand audit, penalty and legal punishment.

There are also special discounts. For example, the goods that are made in the US and are re -imported without change can be freed from duty. In contrast, the products produced abroad using American raw materials, such as sent to India and returned as jewelery, are taxed at full value, including the original American input.

In India, tariff enforcement is managed by the Central Board of Indirect Taxes and Customs under the Ministry of Finance. Like the US, importers should declare product price, type and original country under Customs Act, 1962.

The Indian Customs Authority follows the harmonious system of naming (HSN) to classify goods and to determine the applicable basic customs (BCD) and other duties: eg: such as:

• Counter -defense fee (CVD)
• Special duty (sad)
• Integrated Goods and Services Tax (IGST) on imports (IGST)

Tariffs are calculated at the time of admission filing bill, and payment must be made before the withdrawal of goods. Customs officers can conduct random investigation, assessment assessment, or document verification, and discrepancies can be released from punishment, or delayed.

India uses digital systems such as isgate (Indian Customs Electronic Gateway) for online documentation and payment, and has implemented faceless assessment under its Turant Customs initiative to streamlinom processes and reduce human interfaces.

What is Trump’s broad strategy?

Trump says tariffs will help promote American manufacturing, reduce trade deficit and protect American jobs.

He argues that foreign “theaters” have taken advantage of America. “America has been shot by foreigners,” he said.

Tariffs have also become a bargained chip in their international talks, used to extract widespread concessions. For example, he played a role in the Renaissance of the US-Maxico-Canada Agreement (USMCA) in 2020.

what comes next?

While Trump insisted that his tariff strategy was functioning, global economic bodies and major trade partners have warned of long -term consequences, including increasing inflation and disruption of global supply chains.

However, Trump has indicated some openness to interact with India. When asked about the possibility of a deal, he said, “We are talking to them now … It doesn’t matter much whether we have a deal or we charge them a certain tariff. But you will know at the end of this week.”

He cited BRICS Grouping, of which India is a member, as a factor behind the tariff decision, it is called “a group of anti -American countries” and claims that it represents “an attack on the dollar”.

For now, all eyes are on August 1, when the new 25 percent of tariffs and additional fines on Indian imports are officially effective, possibly defines the terms of trade between the two largest democracy in the world. The result of ongoing discussions can determine whether the tension increases in the front or easily.

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