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India is likely to be among the countries worst hit by U.S. President Donald Trump's trade offensive, with tariffs on Indian imports set to surge to 50 per cent if a deal is not struck by August 27. President Trump stated that the tariff was doubled because India continued to buy Russian oil. When asked if Trump expects "increased trade negotiations" with India after announcing the latest tariffs, he said "No, not until we get it resolved".
The US is India's largest export market for goods accounting for almost 20 per cent of the total. In 2024-25 fiscal year, total bilateral trade between India and the US stood at US$131.8 billion, with trade surplus of US$41.18 billion for India.
New Delhi called the US move "unfair, unjustified" blasting Trump for singling out India when other countries are also buying oil from Russia such as China and Türkiye and vowed to protect its national interest, as if other countries do not have their national interests including the US.
In fact, Trump tariffs have rattled the Indian political establishment and incited popular anger against the US. Joining the chorus of protests, president of the opposition party Congress Mallikarjun Khargealso said, "Indian national interest is supreme:" as its another prominent member Shashi Tharoor prescribing that India should "also impose a 50 per cent tariff on US goods".
It is reported that the US has been pushing India to import not only genetically modified (GM) crops but also subsidised other US farm products. India's agriculture sector accounts for little over 15 per cent of its GDP and almost half of Indians are still dependent on agriculture for their livelihood, thus making it a very sensitive issue politically. Indian Prime Minister Narendra Modi took a very firm stand on the issue and said, "India will never compromise on the interests of farmers, livestock rearers and fisherfolk".
India had reportedly offered trade concession to the tune of US$35-40 billion but was dismissed out of hand by the US labelling India as the highest tariff country in the world. Trump tariffs on India not only have taken the sheen out of India-US relations but risks reversing decades of progress in the "partnership of the twenty-first century".
India's fast rising trade with Russia officially estimated at about US$70 billion in 2023-24 is increasingly being settled in rupees and roubles bypassing the US dollar. If repeated among many trading partners, such arrangements could significantly weaken the dollar's dominance. This increases the effectiveness of US sanctions and tariff threats.
On last Tuesday (August 12) Vinay Kumar, India's ambassador to Russia, told RT that Russian President Vladimir Putin and Indian Prime Minister Narendra Modi share a "positive chemistry", further adding, "They have met many times, they keep regularly speaking on the phone with each other". Kumar also said the Russian and Indian leaders are "very genuine people".
Also, Modi has maintained close security ties with the US through the Quad, an alliance aimed at countering China's economic rise while simultaneously acting as a principal architect of a more assertive BRICS, a grouping of countries for which Trump has extreme hostility. India is also involved in the Shanghai Cooperation Organisation (SCO) and the Asian Infrastructure Investment Bank (AIIB), where China holds a leading role including BRICS.
Meanwhile, India's national security advisor Ajit Doval has visited Moscow and held talks with Russian President Vladimir Putin. Russia's state-run news media reported that Putin and Doval stressed their commitment to a 'strategic partnership'. The talks between Putin and Doval came after U.S. President Donald Trump imposed an additional 25 per cent tariff on Indian goods - ostensibly as part of a broader push to pressure Russia to stop its war in Ukraine by targeting its trade partners.
India will be subject to a 50 per cent tariff until it reaches a comprehensive trade agreement with the US. Since the start of the Russia-Ukraine conflict, India has emerged as the second largest buyer of Russian oil after China, purchasing US$133.4 billion worth of oil last year, compared to minimal imports prior to the Russia-Ukraine conflict.
Trump claims that India is making money from Russian oil by reexporting refined Russian oil to countries like US ally Australia and others. Australia purchased US$6.2 billion of oil from India last year, largely sourced from Russia. Trump clearly indicated that the latest tariffs were imposed due to continued purchases of Russian oil.
To add insult to the injury, Trump also said Moscow and New Delhi "can take their dead economies down together, for all I care. We have done very little business with India, their tariffs are too high, among the highest in the world".
Trump further alluding to the recently signed deal with Pakistan to jointly develop that country's oil resources rubbed more salt to India's wound and said, "Who knows, maybe they'll be selling oil to India someday".
Successive US administrations, including Trump's own, have aggressively courted India, with the aim to strategically encircle China and thwart its economic rise. Under successive Congress and BJP governments, India has aligned itself ever more closely with the US to encircle China through various military-security ties.
India being one of the fastest growing economy in the world continues to face the persistent challenges of poverty and large sections of the population remain trapped in poverty. Although poverty is often measured by income, the situation appears more severe in India when considering a multidimensional approach that includes access to education, healthcare, clean water, housing, sanitation, and employment.
India, now the fourth largest economy globally, not only continues to experience extreme poverty but is also involved in persistent military and political tensions with neighbouring countries. According to the World Bank, considering the poverty line set at US$3.65, India's contribution constitutes 40 per cent of the slight upward adjustment in the global poverty rate, moving from 23.6 per cent to 24.1 per cent.
Trump has claimed that US tariffs imposed on India for purchasing Russian oil have dealt a "big blow" to Moscow. Addressing a press briefing in the White House on last Monday (August 11) Trump said that Russia had been heavily impacted by global pressure stemming from the imposition of US tariffs on multiple countries.
Indian remains a highly protected economy which has engendered a highly inefficient economy. One of the major protection instruments known as quality control orders (QCOs) are regularly employed against imports coming into India including from countries such as Bangladesh along with anti-dumping duties.
According to Bloomberg Economics the cumulative tariffs, higher than not just those of India's rivals such as Vietnam, but also China could cut outbound shipments to the US by 60 per cent and save about a percentage point from GDP. However, higher tariffs on Indian exports including clothing to the US will work in favour of Bangladesh.
Reports indicate that several major retailers in the US have suspended imports of apparel and textile products from India following the imposition of a 50 per cent tariff on Indian goods by the Trump administration. The retailers unwilling to absorb the additional costs, are asking exporters to bear the tariff burden. Exports from other labour-intensive industries, including gems, jewellery, and footwear, may experience similar circumstances.
Many in India believe the 50 per cent tariff is akin to a trade embargo and will abruptly halt affected exports. With the Indian rupee close to its record low, the Reserve Bank of India (RBI), the country's central bank may have to intervene to shore up the currency.
Despite a few discounts for some countries, Trump tariffs are likely to spell serious economic problems for India. In imposing high tariffs on India, it appears his aim is to spell economic as well as diplomatic blows to Russia. Unlike his predecessor Joe Biden he does not apparently wish to continue the Ukraine war to weaken Russia. So,he is trying his hand at tariff wars with the same objective.
While the US views India as a counterweight to China, India seeks to translate US support into regional dominance and diplomatic leverage which India regularly deploys to bully its neighbours. Ironically India now appears to be getting a dose of bullying from Trump and hopefully will learn bullying is not negotiating or diplomacy in conducting its relations with its neighbours.
India's aspirations to rival China as a global superpower face deep rooted structural, geopolitical and economic realities and Trump is aware of those limitations of India. Trump tariffs on India will bring self-indulging and self-adulating Indian leadership to senses to realise that India is not an economic powerhouse, nor even a regional power. Now Modi's India faces formidable economic challenges both from within and outside and must deal with the evolving reality.