25% US tariffs, 'dead economy’: How Donald Trump doubled down on India in 24 hours
India said it has “taken note" of Donald Trump’s statement on bilateral trade and the government is studying its implications.
US President Donald Trump on Wednesday slapped 25% tariffs on Indian goods, along with an unspecified penalty tied to energy and defence purchases from Russia. The US President's move that, if enforced, could erode India's export competitiveness and weigh on investor sentiment.
India said it has “taken note" of Donald Trump’s statement on bilateral trade and the government is studying its implications.
“India and the US have been engaged in negotiations on concluding a fair, balanced and mutually beneficial bilateral trade agreement over the last few months. We remain committed to that objective,” the statement said.
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Donald Trump has set the August 1 date for his tariffs to go into effect.
Trump, however, later told reporters talks on India's tolls were ongoing and "we will see what happens", but did not elaborate.
Hours later on Thursday, Donald Trump once again mounted a sharp attack on India and Russia for their close ties and said the two countries can take their "dead economies down together".
“I don't care what India does with Russia. They can take their dead economies down together, for all I care,” Trump said.
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“We have done very little business with India, their Tariffs are too high, among the highest in the World,” he added.
Trump on Wednesday announced the imposition of a 25 per cent tariff on all goods coming from India starting August 1, plus an unspecified penalty for buying Russian crude oil and military equipment.
The surprise announcement came a day after Indian officials said that a US trade team would visit from August 25 to negotiate a trade deal.
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The announcement is being seen as a pressure tactic to get India to agree to demands made by the US, which has, in recent days, got favourable trade deals with major partners such as Japan, the UK and the European Union.
Trump termed India's trade policies as “most strenuous and obnoxious”.
“All things not good! India will therefore be paying a tariff of 25 per cent, plus a penalty for the above, starting on August first,” Trump said in a social media post.
What would be the impact on India?
India, the world's most populous country, is not an export powerhouse, but the United States is its largest trading partner, with New Delhi shipping goods worth $87.4 billion in 2024.
India's protectionist trade policies, however, saw it run up a surplus of nearly $46 billion the same year.
According to analysts, the tariffs alone could result in a 20-50 basis point hit to India's gross domestic product.
Bloomberg Economics have also projected that a 26 per cent reciprocal levy could cut US-bound shipments by 30 per cent.
The overall impact of Trump's policies could be more severe depending on the Russian "penalty" that is eventually levied on Indian exports.
More broadly, experts say, the president's latest move poses a challenge to India's manufacturing dreams.
"The 25 percent tariff... would undermine India's attractiveness as an alternative manufacturing hub to China," Shilan Shah of Capital Economics said in a note.
Since the Indian tariff is higher than those on other Asian economies, “it would somewhat diminish India's appeal,” Shah said, but added that the country still retained other advantages such as low labour costs.
What sectors will be most affected?
India's top exports include smartphones, drugs, gems, textiles and industrial machinery, with some of the most labour-intensive goods – including jewellery and seafood – under threat.
India's jewellery sector, which exported goods worth more than $10 billion last year, has warned of job losses potentially hitting "thousands".
Smartphones and pharmaceuticals are currently exempt from Trump's "reciprocal" duties.
From Russia with love?
Trump's anger with Indian purchases of Russian military equipment and oil overlooks the fact that New Delhi and Moscow have had historically close ties since the Cold War, say analysts.
Data from the Stockholm International Peace Research Institute shows Russia supplied 76 per cent of India's military imports between 2009 and 2013.
And while this percentage has dropped significantly in recent years, India still depends on Russia for spare parts.
Moscow is also an important supplier of advanced weaponry, including submarine technology and cruise missiles.
India has become a major buyer of Russian oil, providing Moscow with a much-needed export market after the Ukraine war cut it off from traditional European buyers.
That has drastically reshaped energy ties, with India saving itself billions of dollars while bolstering Moscow's coffers.
(With inputs from PTI, AFP)
