Tariff exemptions under Executive Order 14257: What it means for India's pharma, auto sectors

Trump issued a follow-up executive order on August 1 that modified tariff rates for dozens of countries and reaffirmed that all previous exemptions remain intact.

The United States has reaffirmed that Indian exports in key sectors such as pharmaceuticals, auto components, copper, and metals will remain exempt from its newly expanded tariff regime under Executive Order 14257, even as a 25 percent duty hits most other goods starting August 1.

In a notification issued on August 1, the White House confirmed that all earlier product-level exemptions announced on April 2 continue to stand. That’s a relief for India, especially given its high trade surplus with the US and recent friction over tariffs.

The confirmation just two days after US President Donald Trump announced 25 percent tariffs on India, plus a penalty, over trade barriers and New Delhi's continuous import of Russian oil and arms. It also comes just as US President Donald Trump signed a new executive order revising and expanding the US reciprocal tariff framework, calling trade deficits a national security threat and warning of stricter penalties for countries that don’t comply.

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What is Executive Order 14257?

Issued on April 2, 2025, Executive Order 14257 allows the US to impose reciprocal import tariffs, matching or exceeding the duties other countries impose on American goods. The idea is to level the playing field and penalise countries with large, persistent trade surpluses with the US.

President Trump declared a national economic emergency under the International Emergency Economic Powers Act (IEEPA) and the Trade Act of 1974, stating that chronic US trade deficits were undermining American manufacturing and posing risks to supply chains.

As part of this, all imports were made subject to a 10 percent baseline duty, while countries with higher deficits faced steeper, country-specific rates. India, which posted a $45.7 billion goods trade surplus with the US in 2024, according to Reuters, was assigned a 25 percent duty, unless specific exemptions applied.

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What are the exemptions?

Trump issued a follow-up executive order on August 1 that modified tariff rates for dozens of countries and reaffirmed that all previous exemptions remain intact. According to the White House, the revised tariff schedule will take effect seven days from issuance, with goods already in transit before the deadline and entered before October 5 remaining exempt.

India’s 25 percent country-specific tariff will now apply to a wide range of exports not covered by exemptions, including textiles, electronics, machinery, chemicals, and other mass-market goods.

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Here’s what’s still protected under the April 2 exemptions, as reconfirmed by the White House on August 1:

Pharmaceuticals: India exported nearly $9 billion worth of pharmaceutical products to the US in 2024, according to Reuters. These exports, mostly generics, are exempt from the new tariffs, preserving India’s dominance in the American generics market.

Auto Components: With exports worth $7.35 billion in FY25 (as per the Automotive Component Manufacturers Association of India), this is another major sector spared from new reciprocal tariffs. However, a 25 percent duty under earlier Section 232 tariffs still applies across the board.

Copper: India exported around 13,000 tonnes of copper to the US in 2024, as per a report in The Times of India. Despite new 50 percent tariffs being imposed on copper imports from other countries, Indian copper shipments remain exempt.

Metals (Iron, Aluminium, etc.): These continue to be protected under EO 14257’s exemption list. However, like auto parts, they are still subject to existing Section 232 tariffs.

These carve-outs are crucial for India because they represent some of the highest-value and most strategic export sectors.

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But it’s not all good news

The White House made it clear that sectoral tariffs are still on the table. In simple terms, even if Indian pharma or auto parts are exempt today, they could still face targeted tariffs later if the US finds a trade or security reason to justify them.

Also, the bulk of India’s other exports, from garments and gems to engineering goods and electronics, will now face a 25 percent tariff, up from the earlier 10 percent.

The executive order also imposes a 40 percent penalty on transshipped goods, products routed through third countries to avoid duties. The US plans to publish a list of countries and companies involved in such practices every six months.