- 50% US tariffs on many Indian products took effect, doubling the previous 25% duty
- Tariffs target goods including garments, gems, jewellery, footwear, sports goods, furniture
- The move is a response to India's purchase of Russian oil amid the Ukraine conflict
A staggering 50 per cent US tariffs took effect on many Indian products on Wednesday, doubling an existing 25 per cent duty as American President Donald Trump sought to punish New Delhi for buying Russian oil, escalating tensions between the world's two largest democracies and strategic partners.
Trump has raised pressure on India over the energy purchases, as part of the US campaign to end the conflict in Ukraine. He imposed a punitive 25 per cent tariff due to India's purchases of Russian oil, over a prior 25 per cent US duty on many products from India.
It takes total duties as high as 50 per cent for goods such as garments, gems and jewellery, footwear, sporting goods, furniture and chemicals - among the highest imposed by the U.S. and on par with Brazil and China.
But tariff exemptions remain for sectors that could be hit separately, like pharmaceuticals and computer chips.
As the punitive measure kicked in, Trump took to his Truth Social platform and posted a picture of himself with an oil barrel. The image read, "America first" and "America is back".
India-US trade relations have expanded in recent years, but remain vulnerable to disputes over market access. The two nations launched talks on a large-scale trade agreement in February, following Modi's visit to Washington. The deal seeks to increase India-US annual trade to $500 billion by 2030, but the terms of the pact are yet to be finalised.
India Braces For Impact
India has asserted its resilience to stand firm against US pressure, with Prime Minister Narendra Modi vowing he would "never compromise" the interests of the country's farmers.
Per a government estimate, tariffs will impact $48.2 billion worth of exports. Officials have warned that the new duties could make shipments to the US commercially unviable, triggering job losses and slower economic growth.
Former Foreign Secretary and Rajya Sabha MP Harsh Vardhan Shringla said New Delhi is working on minimising the impact by finding alternative markets.
"We have Free Trade Agreements with Australia, the UAE, and the UK, we are close to concluding a Free Trade Agreement with the European Union. This means that we can access different markets and we would have the opportunity to divert some of our exports in that direction," he said.
"We have the most comprehensive, multi-faceted relationship with the United States, the one that we have more than any other country...The strength of that relationship is the values and principles that we share, which will see us through any ups and downs in the relationship," Shringla said, adding that the appointment of Sergio Gor as the next US Ambassador to India is a very positive step.
Impact On India's GDP?
A new SBI Research report believes that the US tariffs are likely to affect the GDP by 40-50 bps and higher input cost inflation.
"As $45 billion of exports will be impacted due to 50 per cent tariffs, at worst scenario, India's trade surplus will convert to trade deficit. However, we believe trade negotiations will restore confidence and improve export to US," the report mentioned.
Amid higher tariffs, India's products might lose competitiveness, potentially benefiting countries like China and Vietnam, as tariffs imposed on India are also higher than those on other Asian countries such as China (30 per cent), Vietnam (20 per cent), Indonesia (19 per cent) and Japan (15 per cent).
"The US remains India's largest export destination for textiles. Over the past five years, India has steadily gained market share in textiles while China's share has fallen significantly. This shift highlights India's growing importance of India in US supply-chain arrangements," the report mentioned.
The US remains the largest market for the gems and jewellery sector, accounting for nearly a third of the sector's $28.5 billion annual shipments. With US tariffs rising from 25 per cent to 50 per cent, exporters are bracing for significant disruption.
Shrimp exporters, who send more than half their output to the US, fear steep losses and order cancellations as the higher tariff comes into effect. This also impacts the prices for US consumers and making India less competitive against rivals like Ecuador.
