Trump orders extra 25% tariff on Indian goods, straining trade ties further

CNA

6 hours ago

WASHINGTON: US President Donald Trump on Wednesday (Aug 6) ordered an additional 25 per cent tariff on goods from India for its purchases of Russian oil, in a move that threatens to severely disrupt bilateral trade and marks the sharpest downturn in ties since his return to office.
The tariff, set to take effect in three weeks, comes on top of a separate 25 per cent duty entering into force on Thursday, according to the text of the executive order released by the White House.
The order also threatens potential penalties on other countries deemed to be "directly or indirectly importing Russian Federation oil".
Exemptions remain for items targeted by separate sector-specific duties such as steel and aluminium, and categories that could be hit, like pharmaceuticals.
The White House said the move was "necessary and appropriate".
INDIA HITS BACK
India's foreign ministry said the decision was "extremely unfortunate" and that New Delhi will take all actions necessary to protect its national interests.
"Our imports are based on market factors and done with the overall objective of ensuring the energy security of 1.4 billion people of India," it said in a statement.
"It is therefore extremely unfortunate that the US should choose to impose additional tariffs on India for actions that several other countries are also taking in their own national interest."
Trump has been ramping up pressure on India after signalling fresh sanctions on Moscow if it did not make progress by Friday towards a peace deal with Kyiv, as Russia's invasion of its neighbour drags on.
India's national security adviser was in Moscow on Wednesday, media in New Delhi reported, coinciding with a visit by US envoy Steve Witkoff.
India's foreign ministry earlier said US pressure to stop it from buying Russian oil was "unjustified and unreasonable" and that it would protect its interests.
ECONOMIC FALLOUT FOR INDIA
Analysts say the new tariffs, which could push Indian export duties to as high as 50 per cent, will impact sectors such as textiles, footwear, gems and jewellery. India exported nearly US$87 billion worth of goods to the US in 2024.
'This is a severe setback. Nearly 55 per cent of our shipments to the US will be affected,' said S.C. Ralhan, president of the Federation of Indian Export Organisations.
Indian exporters now face a 30 to 35 per cent disadvantage compared with competitors in Vietnam, Bangladesh and Japan, economists warn.
The move follows five rounds of stalled trade talks, derailed by disagreements over US access to Indian agriculture and dairy markets, and New Delhi's refusal to cut Russian oil imports, which hit a record US$52 billion last year.
The timing of the tariffs, effective 21 days after Aug 7, suggests Washington may still be open to negotiation, according to Indian officials.
'We still have a window,' a senior official said, adding that phased cuts in Russian oil imports could be part of a compromise.
NO RETALIATION PLANNED
India has not announced any retaliatory tariffs or plans for a high-level visit to Washington. Instead, the government is considering domestic relief for exporters, including loan guarantees and interest subsidies.
A sharp drop in shipments to the US could drag India's GDP growth below 6 per cent this year, down from the central bank's 6.5 per cent forecast, said Sakshi Gupta of HDFC Bank.
Markets responded with caution, the Indian rupee weakened in offshore forwards trade, and equity futures fell modestly.
'Unless there's swift clarity or a breakthrough, a near-term knee-jerk market reaction is inevitable,' said Mayuresh Joshi, head of equity research at Willian O' Neil.
CHINA EXEMPT, FOR NOW
Trump's move could reshape India's economic ambitions. Many American companies have seen India as an alternative to Chinese manufacturing, which Trump had hoped to diminish through the use of tariffs.
Even though China also buys oil from Russia, Beijing was not subject to the additional tariffs in the order signed by the Republican president.
The US and China are currently in negotiations on trade, with Washington imposing a 30 per cent tariff on Chinese goods and facing a 10 per cent retaliatory tax from Beijing on American products.
Meanwhile, Indian Prime Minister Narendra Modi is preparing for his first visit to China in over seven years, raising speculation about a potential shift in New Delhi's strategic alignments.