Former US President Donald Trump has announced a new 25% tariff on Indian goods, effective August 1, along with an additional penalty targeting India’s defense and energy imports from Russia.
New Tariffs and a Russian “Penalty”
In a significant move, Donald Trump declared a 25% tariff on all Indian goods starting August 1. This comes amidst ongoing trade negotiations between India and the United States.
Adding to this, Trump also stated that India would face an unspecified “penalty” due to its substantial defense and energy purchases from Russia. This marks a new layer of economic pressure from the US.
Trump’s Justification and Concerns
Trump used his social media platform to criticize India, calling its trade barriers “the most strenuous and obnoxious non-monetary Trade Barriers of any Country.” He argued that India’s tariffs are among the highest globally.
He further expressed concern over India’s BRICS membership, labeling the bloc “an attack on the dollar.” Trump stressed that the US would not allow its currency to be undermined.
While acknowledging Prime Minister Modi as a friend, Trump highlighted the perceived imbalance in trade. He noted that India sells a lot to the US, but the US doesn’t reciprocate due to India’s high tariffs.
India’s Measured Response
India’s Commerce and Industry Ministry acknowledged Trump’s statement. They confirmed they are “studying its implications” thoroughly.
The ministry reaffirmed India’s commitment to achieving a “fair, balanced and mutually beneficial bilateral trade agreement” with the US. They emphasized the government’s priority to protect its farmers, entrepreneurs, and small and medium-sized enterprises (MSMEs).
India stated it would take “all steps necessary to secure our national interest,” drawing parallels to other trade agreements, including the recent one with the UK.
The Russia Factor: Energy and Defense
The proposed “penalty” for imports from Russia is a first of its kind in US secondary tariffs. Trump explicitly linked it to India’s continued purchases of Russian military equipment and energy, particularly at a time when global efforts aim to halt Russia’s actions in Ukraine.
India’s crude oil imports from Russia have surged dramatically since early 2022, now accounting for 35-40% of its total purchases, up from less than 1% previously. This makes India the second-largest buyer of Russian crude oil after China.
Addressing the Trade Deficit
Trump also highlighted what he termed a “MASSIVE TRADE DEFICIT WITH INDIA!!!” Data from 2024 shows total goods trade between the two nations reached $129.2 billion.
While US exports to India increased by 3.4% to $41.8 billion, imports from India grew by 4.5% to $87.4 billion. This resulted in a goods trade deficit of $45.7 billion, a 5.4% increase from the previous year.
- A 25% tariff on Indian goods will take effect on August 1.
- India faces an additional, unspecified penalty for its defense and energy imports from Russia.
- Trump cited India’s “strenuous trade barriers” and a significant trade deficit as reasons for the action.
- India is currently studying the implications while affirming its commitment to ongoing bilateral trade negotiations.
This announcement comes just ahead of the next round of India-US trade negotiations, scheduled for later next month in India, and is seen as a means to intensify pressure on India to concede to US demands.
