India braces for economic, geopolitical impact of Trump's new tariffs
In an unexpected move last week, US President Donald Trump imposed an additional 25 percent tariff on Indian goods, citing New Delhi's purchases of Russian oil. His Deputy Chief of Staff Stephen Miller said the oil imports amounted to 'financing' Russia's invasion of Ukraine.
The move increased the total duty on Indian exports to 50 percent. While India's Ministry of External Affairs vowed to 'take all actions necessary to protect its national interests,' experts do not see much room for negotiations, as the tariff regime is set to take effect next month.
'It will have economic repercussions if things are not changed. Fifty percent is a lot, and it will affect us. Right now, there is an exemption for pharmaceuticals, but in other areas, there will be an impact,' Manoj Joshi, distinguished fellow at the Observer Research Foundation, told Arab News.
'We don't have much leverage. We don't have many options. The US is the one taking these actions, so unless and until the US withdraws these taxes, there is not much India can do.'
The US and India have been in tariff talks since the beginning of the year, in the wake of the US ongoing global tariff campaign. Prime Minister Narendra Modi made a personal visit to Washington, D.C., in February to meet Trump and discuss strengthening bilateral ties, trade relations, and the procurement of new US weapons and aircraft.
In April, the Trump administration imposed a 25 percent reciprocal tariff on Indian goods in response to India's continued purchases of Russian oil and to rectify trade imbalances. A new deal was expected in July, but Trump did not approve it, leading to a breakdown in talks.
The US threatened to increase tariffs on India if it were not given broader access to several key sectors, including automobiles, steel, aluminum, and dairy products — a concession New Delhi resisted.
'India is not going to compromise on agriculture and dairy products. India will find it very difficult to stop buying Russian oil. There is not much room for any kind of concessions from India's side,' Joshi said.
The US is India's largest export market, accounting for 18 percent of its exports and 2.2 percent of its gross domestic product. The latest estimates by Indian economists suggest that the new tariff could reduce GDP by 0.2 to 0.8 percentage points.
It could also have an impact on India's global standing.
After emerging as a new superpower when it hosted the G20 Summit in 2023 and over the past few years betting everything on its strategic partnership with the US, India may now be forced to recalibrate its relations, including with its rival China.
India is a member of the QUAD — Quadrilateral Security Dialogue — a forum that also includes the US, Japan, and Australia and focuses on regional security and cooperation in the Indo-Pacific region.
India's engagement with the bloc has increased in recent years, shifting from its earlier engagement with BRICS — a grouping that includes also Brazil, Russia, China, and Indonesia, and is the most powerful geopolitical forum outside of the Western world, accounting for 45 percent of the world's population and 35 percent of its economy.
In the wake of tensions with the US, Modi is expected to visit China for a summit of the multilateral Shanghai Cooperation Organization and meet Chinese President Xi Jinping in late August. This will be his first official trip to China in over six years. The last visit took place before the 2020 Galwan Valley border clashes, which significantly strained India-China ties.
Modi's office said on Saturday that he had invited Vladimir Putin to visit Delhi by the year's end. It would be the Russian president's first trip to India since December 2021.
'Consequences would be there so long as Trump is there. But the whole episode has exposed the leadership of India,' said Mohan Guruswamy, policy analyst specializing in economic and security issues.
'India has been ignoring its traditional allies. It has been pursuing QUAD and trying to appease the US, forgetting China and Russia. It has been pursuing the US and calling them strategic allies, and now the US has given it a shock.'
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