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Chinese foreign relations

US-India Trade Dispute Escalates: PM Modi Refuses Trump's Calls Amid New Tariffs

Strategic Insights

— 2 min read

Prime Minister Narendra Modi refused to take four calls from US President Donald Trump in recent weeks as the trade dispute between the two nations intensified. The development comes as Washington imposed punitive tariffs of 50% on nearly half of India's $87.3 billion goods exported to the US, affecting sectors such as textiles, gems and jewellery, seafood, and leather goods. This decision was made despite India's critical role as a supplier of generic drugs to the US, with the Indian pharmaceutical industry and electronics and smartphones being exempted from the tariffs.

Key Takeaways:

  • The US imposed punitive tariffs of 50% on nearly half of India's $87.3 billion goods exported to the US, affecting sectors such as textiles, gems and jewellery, seafood, and leather goods.
  • The Indian pharmaceutical industry and electronics and smartphones are exempted from the tariffs.
  • The tariffs will make Indian exports non-competitive against exporters from countries in the neighborhood who pay tariffs in the 10-25% range.
  • The consequent drop in orders from the US is expected to hurt hundreds of MSMEs, leading to layoffs and unemployment.
  • Analysts estimate a GDP reduction between 0.2% to 1% in FY26, with a potential economic contraction of $7 billion to $25 billion, depending on price adjustments and finding new markets.
  • The impact of the tariffs is moderated by India's economy being driven largely by domestic consumption, with exports to the US accounting for 2-2.5% of GDP.
  • PM Modi refused to take four calls from US President Trump in recent weeks, amid the escalating trade dispute.
  • The Frankfurter Allgemeine Zeitung reported that India will not bow to American pressure and New Delhi wants to manage its relations with both Washington and Beijing in its own way.

*/Administration officials and analysts have proffered a range of reasons for the punitive tariffs, including oil revenues from India fuelling the Russian war effort and New Delhi's role in BRICS' purported attempt to undermine the US dollar.

Statistics:

  • 50% tariff on nearly half of India's $87.3 billion goods exported to the US.
  • 10-25% tariffs in the neighborhood where India's exports will be non-competitive.
  • 0.2-1% GDP reduction in FY26, with a potential economic contraction of $7 billion to $25 billion.
  • $87.3 billion: Value of India's goods exported to the US in 2022.
  • 2-2.5% of GDP: Exports to the US accounted for India's economy.

Sources:

  • Frankfurter Allgemeine Zeitung
  • White House spokeswoman Karoline Leavitt
  • US Administration officials
  • Analysts from various institutions

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