AA Edit | US Tariffs Bitter Pill To Swallow For India
As the nation faces up to a new reality on which the avowed friendships and deepening strategic ties seem to have had no bearing, the transactional US President Donald Trump has stuck to his guns in an ‘America First’ principle
The imposition of a 25 per cent additional import duty is the cruellest cut on India by one of its largest trading partners, the US. The impact on Indian exporters could be even more severe depending on what the quantum of penalty for importing Russian oil and arms is going to be and whether that would be applicable on all goods the US imports from India.
As the nation faces up to a new reality on which the avowed friendships and deepening strategic ties seem to have had no bearing, the transactional US President Donald Trump has stuck to his guns in an ‘America First’ principle, India may have to bite the bullet and plough on to preserve its interests which are more permanent than any personal friendships with the unpredictable leader of the free world.
Truth to tell, India has enjoyed the benefits of its historical protectionist trade policies which may have led to a trade surplus of around $46 billion in 2024 after shipping goods worth around $87.4. Any dip in exports to the US — which could be as high as 30 per cent — will affect the surplus as well as India’s GDP that has grown to an estimated $4.187 trillion now.
Since a 10 per cent duty has been applicable to all goods (not services, but which too will suffer if economies stop growing) and considering tariffs on steel, aluminium and auto parts, the gross duty could be much higher, say as high as 30-34 per cent as, for example, it is computed to apply to textiles. Gems and jewellery, pharmaceuticals, industrial machinery, smartphones, seafood and such other segments in which India has enjoyed an advantage in trading with the US may quickly evaporate.
A greater fear is a higher tariff on Indian goods as opposed to lesser ones on other Asian economies might mean India becoming less attractive as an alternative to China as a manufacturing base, in which sector it benefited as seen in iPhone exports to the US being higher than even China’s in most recent figures. To diversify quickly to other markets will become a compulsion.
Protracted negotiations to try and beat the August 1 deadline for Trump tariffs broke down, principally on the need to protect India’s foodgrain and dairy farmers who make a substantial contribution not only to food security but in terms of job creation too. Their interest cannot be sacrificed for the sake of placating Trump.
To try and conclude a trade deal for what it may be worth should be the highest priority this month even if it is not easy to negotiate when Trump, a self-confessed friend of India and Prime Minister Narendra Modi, plays hardball. But other nations, and a bloc of nations like the EU, have done it to avoid a trade war. In 2025, India is importing from China at a proportionally higher rate (a 13 per cent rise) than any other nation, but that is no solution to finding a measure of balance with the US without giving up the farm and letting adrift all those who plough the soil.
In the longer term, the hit to ties is going to be even more significant as Trump seems to be enjoying Pakistan as the flavour of the season in his spasmodic and whimsical judgments on friends, foes and US national interest. His thinking is so fanciful as to imagine that extraction of Pakistan’s supposedly vast oil reserves can be done speedily and economically to attract India as a customer. But that can well wait while India attempts to seal a trade agreement with the US.