US To Impose 25% Tariff on Indian Goods Amid Trade Tensions

After keeping expectations high for months of an imminent trade deal with India, United States President Donald Trump decided to up the stakes by unilaterally announcing a 25 per cent tariff on Indian goods that would start from August 1. Not only that, he also said punitive penalties would be imposed on Indian trade with Russia on whom the US has imposed sanctions following its invasion of Ukraine.

This comes simultaneously in the wake of a tariff deal that Trump reached with South Korea which brought down their tariff from 25 percent to 15 percent. In return, South Korea would invest US$ 350 billion while also opening up their country for US goods. Trump known for threatening trade partners to radically rework the US tariff regime, had so far treated India differently. But the gloves came off with a social media post on July 30 that termed India a friend, but which had ‘the most strenuous and obnoxious non-monetary Trade Barriers of any Country.’ He added that India bought most of its military equipment and energy from Russia and therefore the 25 per cent tariff. He doubled down a day later by calling India and Russia dead economies feeding off each other. He wrote, ‘I don’t care what India does with Russia. They 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 also announced that US has reached a trade agreement with Pakistan and would assist in developing its oil reserves.

Trump is known for upping the stakes during negotiations and these series of pressure tactics seem to be towards that end. As the South Korean deal shows, even after imposing a 25 percent tariff, it can be reduced depending on what the other party offers. However, India cannot meet some of the major demands of the US like opening its agricultural market because the government cannot be seen to back down on the interests of Indian farmers for American farmers. Trump’s main agenda, even if his not intransigent on such demands, is to make the Indians make a deal as soon as possible.

economic sanctionsglobal tradeIndia tariffsIndia-Russia tradeSouth Korea trade dealtrade barriersTrump tariffsUS trade policyUS-India trade