On Wednesday, U.S. President Donald Trump’s new 25% tariff on Indian imports came into effect, increasing some duties to as much as 50%. This ranks among the highest tariffs imposed by the U.S., comparable to those against Brazil and China.
Let’s explore the reasons behind this additional tariff and its implications for India.
WHY DID TRADE NEGOTIATIONS FAIL? Since April, India and the U.S. engaged in five rounds of talks to finalize a trade deal. However, disagreements over opening India’s extensive farm and dairy sectors, along with its Russian oil imports, led to a collapse in negotiations. Both sides cited political missteps and missed signals as reasons for the breakdown.
WHAT TARIFFS WERE APPLIED TO INDIA?
In July, the U.S. declared a 25% tariff on Indian imports, effective August 7, as part of Trump’s reciprocal trade measures against countries with high barriers to U.S. goods.
In 2024, the U.S. had a $45.8 billion trade deficit with India. Just before the tariff’s implementation, Washington announced an extra 25% tariff on Indian products, due to India’s ongoing Russian oil imports, which now make up 35% of its total fuel imports, a sharp increase from 0.2% pre-Ukraine conflict.
This new tariff was enforced on Wednesday.
WHICH SECTORS ARE AFFECTED? The additional tariff raises duties to as high as 50% on goods like clothing, gems and jewelry, footwear, sports equipment, furniture, and chemicals, risking thousands of small exporters and jobs.
Goods already en route to the U.S. before the deadline receive a three-week exemption.
Steel, aluminum, passenger vehicles, copper, and other goods under separate reciprocal trade tariffs are exempted.
HOW HAS INDIA REACTED?
India has pledged financial support, including increased subsidies on bank loans and aid for diversification in case of financial losses due to the tariffs. It has also pinpointed nearly 50 countries to enhance exports. Officials indicate trade discussions with the U.S. are ongoing.
HAS INDIA ALTERED ITS POLICY ON RUSSIAN OIL IMPORTS? India has not issued any new directives on Russian oil purchases, but Russian embassy officials in New Delhi expect Moscow to continue supplying oil to India.
