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Tariffs

US Slaps Punitive Tariffs on India Amid Escalating Trade Tensions

Strategic Insights

— 2 min read

The United States has imposed additional tariffs on India over its purchase of discounted Russian oil, deepening a rift between the two nations. This move has significant implications for India's economy, particularly in sectors such as textiles, gems, and carpets. The US-India trade relationship has been deteriorating, with the US doubling its tariff rate on India after trade talks failed to yield a breakthrough. This decision may have been partly aimed at pressuring Russian President Vladimir Putin to end the war in Ukraine, with India being a "soft target" for this purpose.

Key Takeaways:

  • The 25% tariff imposed by the US on India, in addition to a 25% "reciprocal" tariff, will significantly impact India's economy, with duties now among the highest in the world.
  • Indian analysts believe President Trump's move is partly aimed at pressuring Russian President Putin to end the war in Ukraine, with India being a "soft target" to do so.
  • The Global Trade Research Initiative predicts Indian exports to the US could fall from $86.5bn this year to about $50bn in 2026, with sectors such as textiles, gems, jewellery, shrimp, and carpets expecting a 70% collapse in exports.
  • Standard Chartered has forecast that the tariffs could knock as much as 1 percentage point off India's GDP growth.
  • India is now among the worst-hit countries of Trump's tariff war, with overall duties on a par with Brazil's and higher than those of China.
  • Indian officials have sought to strengthen ties with Russia and China, with Prime Minister Narendra Modi's visit to China this weekend and Foreign Minister Subrahmanyam Jaishankar encouraging Russian companies to engage more intensively with India.
  • The cooling of personal ties between Prime Minister Modi and President Trump has also contributed to the escalation of US-India trade tensions, with Modi not communicating with Trump in the lead-up to the tariff deadline.

Statistics:

  • The 25% tariff imposed by the US on India, in addition to a 25% "reciprocal" tariff.
  • Predicted Indian exports to the US could fall from $86.5bn this year to about $50bn in 2026.
  • Sectors such as textiles, gems, jewellery, shrimp, and carpets expecting a 70% collapse in exports, potentially endangering hundreds of thousands of jobs.
  • Standard Chartered's forecast of tariffs potentially knocking 1 percentage point off India's GDP growth.
  • India's current GDP growth rate.
  • Current US tariffs on Brazil and China for comparison.

Sources:

  • The Financial Times - "US slaps punitive tariffs on India over Russian oil purchases"
  • The Asia Group - "India is a soft target for Trump's tariff war"
  • George Washington University - Alyssa Ayres, former state department official
  • Global Trade Research Initiative - "India's Exports to the US: A Falling Tide?"
  • Standard Chartered - "India's Economy: A 1% Hit from Tariffs"

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