Written by The Banking Post
Washington’s latest tariff escalation against New Delhi took effect on Wednesday, with US President Donald Trump doubling duties on a wide range of Indian goods to as much as 50%. The move heightens trade tensions between the world’s two largest democracies and key strategic partners.
The new tariffs combine a punitive 25% duty imposed over India’s purchases of Russian oil with an earlier 25% levy on many Indian exports. Affected products include garments, gems and jewellery, footwear, furniture, sporting goods and chemicals—sectors that support thousands of small exporters, particularly in Prime Minister Narendra Modi’s home state of Gujarat.
The hike brings US tariffs on Indian goods in line with levels applied to Brazil and China, among the highest globally. Exporter groups warn that nearly 55% of India’s $87 billion in merchandise exports to the US could be affected, dealing a blow to jobs and competitiveness while benefiting rivals such as Vietnam, Bangladesh and China.
Limited relief, missed talks
A US Customs and Border Protection notice offers a three-week grace period for shipments already en route to the US before the midnight deadline. Certain goods—including steel, aluminium, vehicles and copper—remain subject to separate tariffs under Washington’s national security trade law.
Indian Commerce Ministry officials, speaking on condition of anonymity, said New Delhi plans to provide financial assistance to affected exporters and encourage diversification toward China, Latin America and the Middle East.
The move followed five rounds of failed negotiations. Indian negotiators had hoped to secure capped tariffs of 15%, the level granted to Japan, South Korea and the European Union. But White House trade adviser Peter Navarro confirmed the full hike would take effect as scheduled, offering no concessions.
Strategic partnership tested
Two-way trade between the US and India reached $129 billion in 2024, with Washington running a $45.8 billion deficit, according to US Census Bureau data. Analysts warn sustained tariffs could erode India’s position as a rising alternative to China in global manufacturing, especially in electronics and smartphones.
Despite the trade dispute, both governments sought to project unity this week. The US State Department and India’s Ministry of External Affairs issued identical statements reaffirming their commitment to deepening ties and strengthening the Quad security partnership with Australia and Japan.
