On Wednesday, President Donald Trump imposed an additional 25% tariff on Indian goods. He cited India’s continued imports of Russian oil as the reason behind the move. Consequently, this escalated tensions after trade talks failed.
The new tax begins in three weeks and raises duties on some exports to 50%. That makes them among the highest faced by any US trade partner. However, Trump avoided mentioning China, which also buys Russian oil.
White House officials gave no details about China-related plans. Meanwhile, analysts called this the sharpest drop in US-India ties since Trump’s return in January.
India exported nearly $87 billion worth of goods to the US in 2024. The new tariffs will affect textiles, footwear, gems, and jewellery. Recently, Trump called India’s trade barriers “obnoxious.”
He also claimed, “India’s economy is dead,” and said the country ignores “the killings of Ukrainians.” In response, India’s foreign ministry dismissed the US decision as unjust.
The ministry stated, “India will take all necessary steps to protect its national interests.” Furthermore, it explained that oil buying follows market prices and domestic energy needs.
On the same day, National Security Adviser Ajit Doval flew to Moscow. He aimed to discuss President Putin’s visit to New Delhi later this year. Additionally, he planned to address the new US tariffs with Russian officials.
Kremlin sources called Trump’s move an “attempt to force countries to stop trade with India.” Meanwhile, PM Modi planned his first visit to China in over seven years.
This visit may hint at shifting global alliances. Oil prices rose 1% following Trump’s move and a drop in US crude inventories.
Last week, US Treasury Secretary Scott Bessent warned China about similar tariffs. Notably, a US-China tariff ceasefire ends on August 12. Trade between India and the US is valued at over $190 billion.
“This is a severe setback,” said S.C. Ralhan of the Federation of Indian Export Organisations. “Nearly 55% of our shipments to the US will be affected.” As a result, Indian exporters now a disadvantage.
“With such obnoxious tariff rates, trade would be practically dead,” said Madhavi Arora from Emkay Global. Therefore, Indian officials may cut Russian oil imports and return to talks.
“We still have a window,” said a senior Indian official. However, no one in the Modi cabinet plans a US visit. Instead, they may offer loan guarantees and subsidies to aid exporters.
Sakshi Gupta from HDFC Bank said GDP growth could fall below 6% this year. Shortly after the news, the rupee weakened and stock futures dropped.
Opposition leader Rahul Gandhi called the move “economic blackmail.” He warned, “PM Modi better not let his weakness override the interests of the Indian people.”
Meanwhile, The Hindu noted that EU countries import more Russian energy than India. It added that the Netherlands buys petroleum products from India.
Additionally, the US continues to import fertilisers and other goods from Russia. “Singling out a few countries defies logic,” the newspaper concluded.
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