Trump dumps 25% tariff on India from Friday, plus penalty for buying Russian oil

NEW DELHI: US President Donald Trump on Wednesday announced a 25% tariff on all goods imported from India, along with an unspecified penalty, from Aug 1 after the two countries failed to reach an interim trade deal, triggering nervousness among exporters.

After making several claims over the last four months of having got India to agree to slash tariffs, Trump took to social media to announce the stiff duties and linked the action to India's high trade surplus with the US and purchase of Russian oil and arms.

"Also, they (India) have always bought a vast majority of their military equipment from Russia, and are Russia's largest buyer of energy, along with China, at a time when everyone wants Russia to stop the killing in Ukraine - all things not good! India will therefore be paying 25%, plus a penalty for the above, starting Aug 1," Trump posted on Truth Social.

The US president had earlier announced a "reciprocal tariff" of 26% on India. He later paused it, but left a 10% baseline tariff on all countries.

Trump's proposed penalty has complicated the calculations for Indian businesses.

Over the last three months, he has managed to get other trading partners such as the European Union, Japan, Britain and Vietnam to open up their markets for American goods in return for lowering the tariffs, something he could not do with India due to its reluctance to offer concessions on farm and dairy products.

Within the govt there was clarity that it would not settle for a sub-par deal that did not provide for adequate tariff cuts in the US for Indian textiles, leather and footwear and lower-end auto parts.

Trump announcement seen as bid to mount pressure on India to agree to US demands
President Trump managed to get other trading partners such as EU, Japan, Britain and Vietnam to open up their markets for US goods in return for lowering tariffs, something he could not do with India due to its reluctance to offer concessions on farm and dairy products. Within govt there was clarity that it would not settle for a sub-par deal that did not provide for adequate tariff cuts in the US for Indian textiles, leather and footwear and lower-end auto parts.

The Trump administration's argument that it did not have the legislative mandate to revert to reducing tariffs to zero, as is the case with most trade agreements, did not find traction with Indian negotiators, who were asked by the leadership to leverage the large and growing market offered by India. During the negotiations, India had indicated its willingness to buy larger quantities of LNG, fertiliser and defence equipment from the US, but the demands kept increasing.

Trump's repeated attempt to link the Operation Sindoor ceasefire to his offer for a good trade deal only complicated matters for him. Over the last few weeks, there was also an attempt to prepare industry for possible imposition of tariffs.

While talks for the proposed trade deal will continue, the announcement is seen as a move to mount pressure on India to agree to American demands.

In the meantime, businesses fear that the uncertainty over the penalty will make buyers reluctant to place orders, some of which may flow to other countries. Countries like Vietnam, which have negotiated lower levies, may hurt India.

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