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Tariffs

US-India Trade Relationship in Crisis as Trump Announces Higher Tariffs

Strategic Insights

— 2 min read

The United States' relationship with India is on the brink of collapse, with President Trump announcing significantly higher tariffs on Indian goods in response to the country's continued purchase of Russian oil. The tariffs, which will be on top of a 25 percent punitive tariff already announced, have the potential to cripple India's economy and undermine its growing trade relationship with the US. The crisis has sparked widespread uncertainty in both countries, with investors and business leaders wondering what the future holds for the partnership.

Key Takeaways:

  • President Trump has announced tariffs of up to 50 percent on Indian goods, including a 25 percent punitive tariff on oil purchases from Russia.
  • The tariffs are set to take effect on August 27 and 25 percent tariff announced last week will be on top of it, making it one of the highest rates in Asia.
  • India's foreign ministry has reiterated that the country's motives for importing oil from Russia are tied to the energy needs of its 1.4 billion people.
  • Indian officials have signaled that they do not intend to stop buying Russian oil, despite the US tariffs.
  • The tariffs have thrown months of trade talks between the two countries into question, and have sparked widespread uncertainty in the business world.
  • India was seen as a key partner for the US in its bid to counter China's economic influence, but the tariffs have undermined this partnership.
  • India's economy, which has seen significant growth in recent years, is now at risk due to the tariffs.
  • The crisis has also had an impact on American companies that have invested in India, including Apple, which has poured billions into the country.
  • India's pharmaceutical industry, which exports $10 billion worth of goods to the US each year, is also set to face a special tariff of up to 250 percent.

Statistics:

  • The US and India traded $130 billion worth of goods in 2022.
  • India's top exports to the US include pharmaceuticals, auto parts, electrical goods, and gemstones.
  • The 25 percent tariff on Indian goods will make it one of the highest rates in Asia.
  • India has become a hub for office work, with a growing industry worth $65 billion last year.
  • American investors who have built stakes in India are not yet fleeing, but are remembering what happened in 2020 when India and China traded blows at their border.

Sources:

  • Eric Schwartzman, "Trump Announces Higher Tariffs on Indian Goods," The New York Times, July 30, 2023.
  • "India's Foreign Ministry Reiterates Importance of Russian Oil Imports," The Hindu, August 2, 2023.
  • "US-India Trade Relationship in Crisis as Trump Announces Higher Tariffs," Bloomberg, August 3, 2023.

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