WASHINGTON/NEW DELHI: A significant escalation in US-India trade tensions unfolded Wednesday as US President Donald Trump’s decision to double tariffs on Indian imports took effect, raising duties on a wide range of products to as much as 50 per cent. The move marks a serious blow to bilateral trade ties between the two major democracies and longstanding strategic partners.
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The latest round of tariffs, a 25 per cent hike targeting India’s ongoing energy ties with Russia, comes on top of an existing 25 per cent duty imposed by the US on several Indian exports. Affected items include textiles, footwear, gems, furniture, sporting goods, and chemicals, placing them among the highest-taxed goods in US trade, comparable to duties on imports from China and Brazil.
The increase is expected to hit India’s small and medium exporters hardest, particularly those based in Prime Minister Narendra Modi’s home state of Gujarat. Despite requests for relief, India’s Commerce Ministry has yet to issue an official response. However, a senior ministry official, speaking anonymously, said the government would provide financial support to impacted exporters and encourage a pivot to new markets such as China, Latin America, and the Middle East.
US Customs and Border Protection has granted a temporary exemption for Indian goods already en route to the US prior to the deadline, allowing them to enter under the previous tariff structure until 12:01 AM EDT on September 17.
Notably, products like steel, aluminum, passenger vehicles, and copper, which are already covered under separate tariffs under the Section 232 national security law, remain unaffected by this new measure.
While US trade officials point to high Indian tariffs on American farm products and vehicles (some exceeding 100 per cent), Indian officials argue that their average import duty on US goods remains around 7.5 per cent.
BREAKDOWN IN TRADE TALKS
The tariff hike follows five unsuccessful rounds of negotiations between Washington and New Delhi. Indian negotiators had been hopeful of capping the tariffs at 15 per cent, similar to rates applied to US allies like Japan, South Korea, and the EU. However, hopes faded as the deadline approached with no resolution in sight.
White House trade advisor Peter Navarro confirmed the tariffs would proceed but offered no further comment.
MAJOR TRADE DISRUPTION EXPECTED
With two-way trade between the countries totaling $129 billion in 2024 and a US trade deficit of nearly $46 billion, the impact could be substantial. Export industry groups estimate the tariff increases could affect over half of India’s $87 billion in exports to the US, weakening its position against rivals such as Vietnam, China, and Bangladesh.
“This will hit our most crucial export sectors hard,” said SC Ralhan, head of the Federation of Indian Export Organisations. He warned of a 30-35 per cent competitive disadvantage for key sectors like textiles, chemicals, and leather.
Ralhan urged the Indian government to consider measures such as a one-year moratorium on loan repayments for affected businesses and improved access to low-cost credit.
Economist Rajeswari Sengupta of Mumbai’s Indira Gandhi Institute of Development Research suggested allowing the rupee to depreciate as a potential tool to offset export losses and boost competitiveness.
Analysts warn that prolonged tariffs at current levels could undermine India’s ambitions to position itself as a manufacturing alternative to China, especially in electronics and consumer goods.
STRATEGIC RELATIONS UNDER STRAIN
Despite the trade row, both governments have maintained their broader strategic commitment. In a rare show of unity, the US State Department and India’s Ministry of External Affairs issued identical statements on Tuesday following a virtual meeting between senior defense and foreign ministry officials. The parties pledged to continue deepening their strategic partnership and cooperation under the Quad alliance, which also includes Japan and Australia.
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Nonetheless, the tariff conflict raises fresh concerns over how economic friction could impact the broader geopolitical relationship between the US and India, particularly as both nations seek to counterbalance China’s influence in the Indo-Pacific region.