Trump Slaps 50% Tariff on India: What It Means for Russian Oil Imports and Global Trade

Donald Trump recently imposed steep tariffs of 50% on many imports from India. This move is a response to India purchasing discounted Russian oil, which the U.S. claims indirectly supports Russia’s war against Ukraine.

These tariffs took effect just after midnight on Wednesday, potentially causing serious harm to India’s economy and complicating global supply chains. Earlier this month, a 25% tariff was already implemented on Indian goods, but Trump decided to double it, heightening tensions with both allies and rivals.

Indian officials argue that the country has been unfairly singled out for its trade ties with Russia. In light of these tariffs, India may deepen its relationships with Moscow and Beijing, distancing itself further from Washington.

In the U.S., the largest market for Indian exports, nearly $87.3 billion worth of goods face high duties. However, some products like smartphones remain exempt from these tariffs, for now. A report from the U.S. Department of Homeland Security confirmed this latest action. Economists now predict a significant drop in trade between the two nations.

Goldman Sachs’s chief economist for India, Santanu Sengupta, expressed concern. He stated that if the tariffs persist, India’s GDP growth could dip below 6%. Competing countries like Turkey and Thailand, which face lower U.S. tariffs, are already attracting American buyers.

About 30% of India’s exports to the U.S., worth $27.6 billion, are still duty-free, but key sectors like textiles and jewelry, which depend heavily on American sales, are struggling. The Federation of Indian Export Organisations (FIEO) noted that manufacturers in different regions are pausing production due to rising costs. “Indian goods have become uncompetitive when stacked against products from countries like Vietnam and China,” FIEO president SC Ralhan pointed out.

The reaction in India has been defiant. Prime Minister Narendra Modi encouraged citizens to support local products. He stated, “We will bear the pressure from these tariffs.”

The U.S. is a crucial market for India, accounting for nearly one-third of its exports in essential sectors like textiles and jewelry. Even if the tariffs ease, trust between the two countries may take a hit. A senior Indian trade official noted that the positive groundwork laid over years is now at risk.

S. Jaishankar, India’s external affairs minister, called the U.S. demands to halt Russian oil imports “unjustified”. Interestingly, Trump has not applied similar pressure on China, another significant purchaser of Russian oil.

Despite these tensions, trade discussions between the nations continue. Earlier hopes for a trade deal that capped tariffs at 15% fell through after India hesitated to open its agriculture market.

India is now leaning toward Russia, referring to it as an “all-weather friend”. Jaishankar visited Moscow recently, and Modi is expected to visit China soon to improve relations following past conflicts.

This situation reflects deeper geopolitical dynamics. Michael Kugelman, a veteran South Asia analyst, remarked that the current U.S. administration is setting a record for creating challenges with key partners within a short timeframe.

As trade routes shift, the impacts of these tariffs will unfold over time. This saga emphasizes not only economic ties but also the intricate web of global diplomacy.

For more about the implications of U.S.-India trade relations, you can dive into the original report by The Guardian.

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