New Tariffs Intensify U.S.-India Divide
The United States has introduced severe tariffs on India in response to its acquisitions of discounted Russian oil, which poses a significant challenge to the rapidly growing Indian economy. This move further strains the relationship between Washington and New Delhi.
The newly implemented tariffs, set at 25% in addition to an existing reciprocal tariff of the same rate, took effect at 12:01 AM Eastern Time on Wednesday, placing India among the countries with the highest tariff rates globally.
Trade Negotiations Collapse
President Donald Trump’s declaration this month to double tariffs on India marked a sharp increase in tensions, as both parties were unable to achieve any breakthroughs in ongoing trade discussions. Initially, negotiators aimed to finalize the first phase of a trade agreement by early summer.
Alyssa Ayres, a former State Department official now with George Washington University, noted the rapidly deteriorating U.S.-India relationship, describing it as “head spinning.”
Political Dynamics and Impacts
Indian analysts suggest that Trump’s decision is partly aimed at applying pressure on Russian President Vladimir Putin concerning the ongoing war in Ukraine. Despite the impending tariffs, India continues to procure Russian crude oil, albeit in reduced quantities.
“Trump is trying to get at Putin and India is a soft target to do so,”
stated Ashok Malik, chair of The Asia Group’s India practice and a former advisor in India’s foreign ministry.
Predictions for Indian Exports
The Global Trade Research Initiative, based in New Delhi, has projected that India’s exports to the U.S.—its largest trading partner—could plummet from $86.5 billion this year to around $50 billion by 2026. The report indicates that sectors such as textiles, gems, jewelry, shrimp, and carpets may experience export declines of up to 70%, threatening hundreds of thousands of jobs.
Standard Chartered has estimated that these tariffs could reduce India’s GDP growth by as much as one percentage point. However, Anubhuti Sahay, the bank’s head of India economic research, highlighted that India’s economy, which is primarily domestically focused, is less vulnerable compared to more export-dependent Asian nations.
Sector-Specific Tariffs
Separate tariffs will also apply to semiconductors, consumer electronics, and pharmaceuticals. Nevertheless, the overall tariffs place India among the worst-affected countries in Trump’s trade conflict, rivaling Brazil and surpassing China’s rates, with China following a different negotiation strategy.
“I think India could survive 25 percent… but 50 percent is a completely different scenario,”
commented Mark Linscott, a former U.S. trade negotiator who now provides counsel to U.S. and Indian businesses.
Stalled Talks and Diplomatic Outreach
Talks have fallen through, in part due to New Delhi’s reluctance to open its extensive agricultural and dairy markets. Prime Minister Narendra Modi has emphasized that he will “never compromise” on these issues, leading U.S. trade negotiators to cancel their planned trip to New Delhi this week.
In light of the current situation, Indian officials have been reaching out to Russia and China. Modi plans to visit China for the first time in seven years this weekend. Last week, Foreign Minister Subrahmanyam Jaishankar urged Russian firms to collaborate more closely with India.
Some Indian officials and analysts hypothesize that the breakdown in negotiations reflects a cooling of the personal rapport between Modi and Trump. Tensions have reportedly risen as Trump has publicly criticized Apple for relocating manufacturing to India and has made disparaging remarks about the Indian economy while also engaging with Pakistan, India’s primary rival.
Sources indicate that Modi did not communicate with Trump prior to the imposition of tariffs, wary of the president attempting to extract concessions from outside the established negotiations. Modi’s office did not respond to a request for comment.
Linscott underscored the decline in direct communications between the leaders, stating,
“The missing component was the leader-to-leader conversation, and the opportunity for the president to seal the deal, to put his stamp of approval on it.”
