India has 20 days to avoid 50% Trump tariffs – what are its options?
India has unexpectedly become a key target in Washington’s latest push to pressure Russia over the Ukraine war.
On Wednesday, Donald Trump doubled US tariffs on India to 50%, up from 25%, penalising Delhi for purchasing Russian oil – a move India called “unfair” and “unjustified”. The tariffs aim to cut Russia’s oil revenues and force Putin into a ceasefire. The new rate will come into effect in 21 days, so on 27 August.
This makes India the most heavily taxed US trading partner in Asia and places it alongside Brazil, another nation facing steep US tariffs amid tense relations.
India insists its imports are driven by market factors and vital to its energy security, but the tariffs threaten to hit Indian exports and growth hard.
Almost all of India’s $86.5bn [£64.7bn] in annual goods exports to the US stand to become commercially unviable if these rates sustain.
Most Indian exporters have said they can barely absorb a 10-15% rise, so a combined 50% tariff is far beyond their capacity.
If effective, the tariff would be similar to “a trade embargo, and will lead to a sudden stop in affected export products,” Japanese brokerage firm Nomura said in a note.
The US is India’s top export market, making up 18% of exports and 2.2% of GDP. A 25% tariff could cut GDP by 0.2–0.4%, risking growth slipping below 6% this year.
If anything the US’s actions could “push India to reconsider its strategic alignment, deepening ties with Russia, China, and many other countries”, says Ajay Srivastava of the the Global Trade Research Initiative (GTRI), a Delhi-based think tank.
Modi will visit China for the regional Shanghai Cooperation Organisation (SCO) summit – his first since the deadly 2020 Galwan border clashes. Some suggest a revival of India-Russia-China trilateral talks may be on the table.
The immediate focus is on August trade talks, as a US team visits India. Negotiations stalled earlier over agriculture and dairy – sectors where the US demands greater access, but India holds firm.
Source: BBC