Donald Trump drops tariff bomb on India
TOI correspondent from Washington: The United States on Monday declared what is effectively a limited trade war on India, notifying a 50 percent tariff (25 percent taxes and 25 percent penalty) on most goods import from India. Issued by the Department of Homeland Security, the notification said the tariffs are in response to “threats to the United States by the government of Russian Federation,” and it is implementing a presidential order that had determined it is “necessary and appropriate” to impose tariffs on India “which is directly of indirectly importing Russian Federation oil.”The notification was India-specific and made no mention of China, which imports more Russian oil than India, making it clear that Trump is willfully singling out New Delhi for punishment even as he gives a wide berth to Beijing and is openly cosy with Moscow despite expressing frustration over the ongoing Russia-Ukraine war.Administration officials, MAGA principals, and analysts have proffered a range of reasons, from oil revenues from India fuelling Russian war effort to New Delhi’s role in BRICS’ purported attempt to undermine the US dollar, to New Delhi not recognizing Trump’s self-professed role in bringing about a truce between India and Pakistan, for what some experts say is clearly disproportionate and vengeful tariffs.Trump himself — as also White House spokeswoman Karoline Leavitt — has used the word “sanctions” to describe the punitive taxes. The notification, coming hours after PM Modi defiantly indicated that India would not buckle under pressure, will kick in on at midnight on August 27 EST (August 28, 9.30 am IST). At that time, nearly half of India’s $87.3 billion goods export to the US will subjected to 50 percent tax. The affected sectors include textiles and apparels, gems and jewelry, seafood (mainly shrimp), and leather goods.The Indian pharmaceutical industry, which is a critical supplier of generic drugs to the US, and electronics and smartphones (including Apple iPhones) are exempted from the tariffs.While some of the tariff costs may be borne by Indian exporters cutting prices and US importers paying more at the other end, it will still make Indian exports non-competitive against exporters from countries in the neighborhood who pay tariffs in the 10-25 percent range. The consequent drop in orders from the US, which is India’s biggest market for such products, is expected to hurt hundreds of MSMEs (Micro, Small, and Medium Enterprises) with resultant layoffs and unemployment. Analysts estimate a GDP reduction between 0.2% to 1% in FY26, with a potential economic contraction of $7 billion to $25 billion, depending on price adjustments and finding new markets. More broadly, impact of the tariffs is moderated by India’s economy being driven largely by domestic-consumption, with exports to the US accounting for about 2%–2.5% of GDP.
