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US punitive tariff: India keeps door open for negotiations for trade deal, but red lines remain
Donald Trump’s 25% punitive tariff due to India’s purchases of Russian oil kicked in on Wednesday, adding to an earlier 25% reciprocal tariff on Indian products
India believes the Trump administration’s doubling of US tariffs on Indian goods to 50% — including a 25% penalty for purchasing Russian crude oil — is “unjustified” and has kept the door open for negotiations aimed at a trade deal, people familiar with the matter said on Wednesday.
US President Donald Trump’s 25% punitive tariff due to India’s purchases of Russian oil kicked in on Wednesday, adding to an earlier 25% reciprocal tariff on Indian products. The new penalties took total US duties to as much as 50% for goods such as garments, gems and jewellery, footwear, furniture, and chemicals.
The tariffs are “unjustified” and the Indian side’s response to the actions of the Trump administration has been restrained and responsible, the people said on condition of anonymity.
Contacts between the two sides are continuing with the aim of reaching an understanding on the matter and to ultimately agree on a trade deal, one of the people said.
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In all these contacts, the Indian side will not compromise on the interests of its farmers, small producers and micro, small and medium enterprises (MSMEs), a second person said. “We believe issues will be resolved in negotiations, but there will be no going back on our red lines,” he said.
There was no official reaction to the 25% punitive tariff from the commerce ministry or the external affairs ministry.
The people also said it was unjustified and unacceptable that the US had opted to penalise India for buying oil from Russia when no such action had been taken against larger purchasers of Russian crude, such as China.
“The punitive tariff for buying Russian oil came as a bolt from the blue as it was not part of the terms of reference (TOR) agreed on by the two sides in April for the trade negotiations,” the second person said, adding that the Indian side hopes this 25% tariff is temporary and may be ended bilaterally.
Also Read | 50% US tariff on India takes effect: What exports get impacted, what don't
The people said it was unusual that the US has opted to penalise India for trading with Russia when the Trump administration is seeking to improve relations with Russian President Vladimir Putin. “The US is also working to mend fences with China, for which the US extended its tariff truce for 90 days even though it buys large volumes of Russian oil,” a third person said.
The 25% punitive tariff imposed will add to the strains in the India-US relations, the likes of which have not been witnessed for more than a decade as the two sides worked to ramp up cooperation in areas ranging from trade and investment to defence and security and emerging technologies.
India-US two-way trade in goods was worth $129 billion in 2024, with a $45.8-billion US trade deficit, according to US Census Bureau data. Exporter groups estimate hikes could affect nearly 55% of India’s $87 billion in merchandise exports to the US, while benefiting competitors such as Vietnam, Bangladesh, and China, Reuters reported.
Ahead of the US punitive tariff kicking in, Prime Minister Narendra Modi reiterated on Monday that his government won’t compromise on the interests of farmers and small producers. “My government will never let any harm come to the small entrepreneurs, farmers, and animal keepers. No matter how much pressure comes, we will keep increasing our strength to withstand it,” he said.
Speaking at a public event over the weekend, external affairs minister S Jaishankar identified the three main issues affecting India-US ties as trade negotiations, energy purchases from Russia, and US assertions of mediation between India and Pakistan. He said India has set the protection of farmers and small producers as “red lines” in trade talks that are continuing.
The people noted that apart from the problems with Trump’s trade and tariff policies, institutional contacts between the two sides were continuing to take forward cooperation in numerous areas. “Officials from the defence and foreign ministries of both sides held talks under the 2+2 mechanism on Monday, and among the issues discussed were trade and investment, energy security, and counter-terrorism,” the first person said.
