Editor’s Note
This article examines the significant escalation of U.S.-India trade tensions following the imposition of steep new tariffs, analyzing the economic and geopolitical ramifications of this policy shift.
President Donald Trump has imposed a crushing 50% tariff on Indian goods to punish the country for buying Russian oil, undermining decades of Washington’s efforts to strengthen ties with New Delhi.
The new tariffs, the highest in Asia, took effect at 12:01 a.m. in Washington this Wednesday, doubling the existing 25% levy on Indian exports. They will affect more than 55% of goods sent to the U.S.—India’s largest market—and will hit labor-intensive industries such as textiles and jewelry hard. Key exports like electronics and pharmaceuticals are exempt, which for now spares Apple Inc.’s major investments in new factories in India.
This move marks a sharp deterioration in relations between the two nations and a radical shift in Washington’s strategy of courting India as a counterweight to China. Trump has criticized India for buying Russian oil, which, he says, funds President Vladimir Putin’s war in Ukraine. New Delhi has defended its ties with Moscow and called U.S. actions “unfair, unjustified, and unreasonable.”
The exorbitant tariffs threaten the competitiveness of Indian exports against rivals like China and Vietnam and raise doubts about Prime Minister Narendra Modi’s ambitions to transform the South Asian nation into a major manufacturing hub.
Exporters of apparel, footwear, and manufactured goods like toys are preparing for a drop in orders and potential job cuts.
said Israr Ahmed, managing director of Farida Shoes Pvt. Ltd., which relies on the U.S. for 60% of its business. He noted that buyers have asked exporters to share product specifications with suppliers in other countries, increasing the threat that orders will be diverted to nations like Bangladesh and Vietnam.
India’s Ministry of Commerce and Industry did not respond to a request for comment on Wednesday.
The tariffs surprised Indian officials and come after months of trade talks between New Delhi and Washington. India was one of the first countries to initiate negotiations with the Trump administration, but its own high tariffs and protectionist policies in sectors like agriculture and dairy have frustrated U.S. negotiators.
Relations deteriorated further after Trump lashed out at India for its purchase of Russian oil. New Delhi has argued that these acquisitions stabilize energy markets and has said it will continue buying Russian crude “based on financial benefit.”
Tensions have also increased due to Trump’s repeated claims that he negotiated a ceasefire between India and Pakistan after a four-day armed conflict in May. The U.S. president has said he used trade deals as bargaining chips in the truce, comments that Modi and his top officials have consistently denied. Trump repeated these claims on Tuesday at the White House, describing Modi as a “fantastic man” whom, he said, he called to prevent the India-Pakistan conflict from escalating into a nuclear war.
The declining relationship has pushed India to distance itself from the U.S. and strengthen ties with other BRICS bloc members.
Beijing and New Delhi have sought in recent months to mend relations that had plummeted after the violent border clashes in 2020. Modi is expected to meet with President Xi Jinping on the sidelines of a security summit in China next week, in what will be his first visit there in seven years.
At the same time, India and Russia have committed to increasing their annual trade by 50% to $100 billion over the next five years. India has increased its imports of Russian crude since the large-scale invasion of Ukraine in 2022 and now accounts for about 37% of Russia’s oil exports, according to Moscow-based consultancy Kasatkin Consulting.
A U.S. trade team that was scheduled to arrive in India from August 25 to 29 for a sixth round of negotiations postponed its visit, raising doubts about whether the two sides can reach an agreement before the Northern Hemisphere autumn, a goal set during Modi’s visit to the White House in February.
Citigroup Inc. estimates that the combined 50% tariff implies a downside risk of 0.6 to 0.8 percentage points to annual GDP growth. The economic impact could be cushioned by the fact that the Indian economy is largely driven by domestic demand rather than exports, so bolstering consumer and business confidence is key to faster growth. Private consumption accounts for about 60% of India’s GDP, and although the U.S. is its largest export market, with shipments worth $87.4 billion in 2024, that equates to just 2% of India’s total GDP.