President Trump's recent decision to impose a cumulative 50% tariff on Indian goods has significantly strained the relationship between the United States and India, potentially jeopardizing decades of strategic partnership. The move, which includes an additional 25% tariff on top of an already planned 25% duty, is a direct response to India's continued purchase of Russian oil despite US pressure to cut off Moscow's revenue streams amidst the war in Ukraine. Trump administration officials have accused India of "fuelling the (Russian) war machine" with its ongoing crude oil imports.
The Ministry of External Affairs (MEA) has strongly criticized the tariffs as "unfair, unjustified, and unreasonable," emphasizing that India's oil imports are driven by market factors and the need to ensure energy security for its 1.4 billion citizens. The MEA reiterated that India will take "all actions necessary to protect its national interests". This firm stance reflects India's commitment to its strategic autonomy and its unwillingness to be coerced into abandoning its economic ties with Russia.
The tariffs are expected to impact approximately 55% of India's exports to the US, particularly affecting sectors such as textiles, leather, engineering goods, gems and jewellery, pharmaceuticals and marine products. The Federation of Indian Export Organizations (FIEO) has warned that the tariffs could place Indian exporters at a 30-35% competitive disadvantage compared to their counterparts in countries with lower tariff rates. While a study by the PHD Chamber of Commerce and Industry (PHDCCI) suggests a "negligible" impact of 0.19% on India's GDP and a 1.87% impact on total global merchandise exports, economists caution that the tariffs could still lower India's GDP growth. HDFC Bank economists suggest that if the tariffs remain in place for a full year, India's GDP could take a 40-50 basis point hit, significantly lowering FY26 GDP growth forecast to below 6%.
The move has been criticized by some as "economic blackmail" aimed at pressuring India into an unfair trade deal. Experts like Michael Kugelman from the Wilson Center have described the situation as the "worst crisis" in US-India relations in two decades. The tariff hike has also raised concerns about the future of the US-India strategic partnership, with some analysts suggesting that it could have a "damaging impact" on the broader relationship.
Despite the escalating tensions, both New Delhi and Washington are reportedly continuing talks, seeking a trade deal that could restore calm. India is said to be considering additional tariff concessions, increased purchases of US liquefied natural gas (LNG) and defense equipment, and other offers to put on the negotiating table. However, the path forward remains uncertain, and the long-term implications of Trump's tariff gamble on US-India relations remain to be seen. The new tariff structure, announced on Wednesday, will come into effect after a 21-day grace period, starting August 27, 2025. This window leaves room for a negotiated resolution, although options appear limited for both sides.
