Donald Trump announces 25% tariffs: Where does that leave India-US trade deal talks? What to expect
US President Donald Trump's fresh 25% tariff rate on India has raised an important question - what's next for trade talks between the countries? Is India stuck with a 25% tariff rate for its goods exported to the US or is this a new pressure tactic from the Donald Trump administration to get India to agree to its terms.
Not only has Trump announced a 25% tariff on India (lower than 26% in April), he has also warned of an additional penalty on India's exports to the US for its continued purchase of Russia's crude oil and arms.
Trump's post on Truth Social announcing tariffs on India reads, 'Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non-monetary Trade Barriers of any Country.
Also, they have always bought a vast majority of their military equipment from Russia, and are Russia's largest buyer of ENERGY, along with China, at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE — ALL THINGS NOT GOOD! INDIA WILL THEREFORE BE PAYING A TARIFF OF 25%, PLUS A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST.
THANK YOU FOR YOUR ATTENTION TO THIS MATTER. MAGA!'
Does this leave India-US trade deal talks in a limbo? We take a look:
India-US Trade Talks: Surprise Turn Of Events?
In the last few weeks the US President had said several times that India and the US are nearing a trade deal.
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While announcing the trade deal with Indonesia, he had also hinted that the bilateral trade agreement with India would be on similar lines for market access. Trump's move of not sending a tariff letter to India had also been seen as a positive signal.
Commerce minister Piyush Goyal too had indicated 'fast pace' progress in the trade negotiations. He had recently said that talks were making 'fantastic progress'. But yesterday Trump's statements indicated that the trade deal was not going to be finalized before the August 1 deadline for reciprocal tariff.
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'Will know at the end of the week…': After 25% tariff move, Donald Trump says talking to India; signals 'anti-US' group BRICS a factor
Trump's Pressure Tactics
Trump's tariffs on India appear to be a clear case of putting pressure on India to finalise a deal that would favour America. Trump's White House economic adviser Kevin Hassett has said, 'I think President Trump is frustrated with the progress we've made with India but feels that a 25% tariff will address and remedy the situation in a way that's good for the American people.'
Trump and the United States Trade Representative Jamieson Greer will soon release further information regarding the additional sanctions that Trump has declared.
The frustration seems to stem from issues such as India being firm on not opening its agriculture and dairy sectors, and its continued purchase of Russian crude oil and defence equipment. While the US wants access to India's agriculture and dairy markets, it has also been actively looking to sell its oil and arms to India.
Trump has also in the past claimed that India has one of the highest tariffs and the trade relationship needs to change to America's advantage.
Hours after announcing the tariffs, Trump said US is in talks with India. Answering a question on 25% tariffs on India and the additional penalty he said, "Prime Minister Modi is a friend of mine, but they don't do very much business in terms of business with us. They sell a lot to us, but we don't buy from them...Because the tariff is so high. They have one of the highest tariffs in the world. Now, they are willing to cut it very substantially.
But we will see what happens.'
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Explainer: What do Donald Trump's 25% tariffs on India mean? What happens if they stay…
India's Firm Response
India has been clear from the very beginning of the negotiations that its agriculture and dairy sectors are not open for any trade deal. It has maintained this stance in all its trade agreements till date.
Reacting to Trump's announcement of a 25% tariff rate, the Ministry of commerce & industry was firm that India's national interest was the first priority.
'The Government attaches the utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, and MSMEs.
The Government will take all steps necessary to secure our national interest, as has been the case with other trade agreements including the latest Comprehensive Economic and Trade Agreement with the UK,' the commerce ministry's statement reads.
Yet another important thing to note is that India has always said that deadlines can't be a factor to seal trade deals. Piyush Goyal has repeatedly said that India does not work on trade deals with deadlines in mind.
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Donald Trump imposes 25% tariffs on India! How does India compare to other economies like China, Japan, Vietnam on the rate list? Check details
Next Round Of Trade Talks
India also seems to have struck a conciliatory note in its statement, signalling willingness to continue the negotiation process.
'The Government has taken note of a statement by the US President on bilateral trade. The Government is studying its implications. India and the US have been engaged in negotiations on concluding a fair, balanced and mutually beneficial bilateral trade agreement over the last few months.
We remain committed to that objective,' the commerce ministry has said.
US officials will be in India from August 25 onwards for the sixth round of the trade deal talks. During PM Narendra Modi's visit to the US in February, India and the US had announced that a trade deal is likely to be finalised by the fall of this year.
While Trump's new tariff announcement may appear to be a setback in the negotiation process, it is expected that the two countries will find a common ground to finalize a mutually beneficial trade deal in the coming months.
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