Donald Trump imposed 50% tariffs on most US imports from India, making good on a threat to punish one of the world’s largest economies over its purchases of discounted Russian oil.
The tariffs, which came into effect just after midnight on Wednesday in Washington, risk inflicting significant damage on the Indian economy and further disrupting global supply chains.
US tariffs of 25% on Indian goods went into force earlier this month, but Trump announced plans to double the rate, citing New Delhi’s purchases of Russian oil, which the White House has argued is indirectly funding Russia’s war against Ukraine.
The US president has significantly increased US tariffs on goods from much of the world since reentering the White House in January, straining relations with economies of allies and rivals and fueling fears of higher inflation.
This latest move leaves Indian exporters facing among the highest US duties Trump has slapped on goods from overseas. Brazil is also grappling with 50% tariffs on its exports to the US.
Ministers in India argue it has been unjustly singled out for its trade relationship with Russia and officials caution the country will likely work more closely with Moscow and Beijing – and drift further from Washington – as a result.
Most Indian goods exports to the US (worth $87.3bn to the US last year, according to the US trade representative) now face steep duties, although some key products including smartphones are set to be spared, for now.
The action, confirmed in a notice by the US Homeland Security Department earlier this week, prompted some economists to predict a precipitous fall in trade between the two countries.
“I don’t care what India does with Russia,” Trump claimed on Truth Social, his social network, last month. “They can take their dead economies down together, for all I care.”
In India, the mood has been defiant. The country’s government has refused to halt purchases of Russian oil, and prime minister Narendra Modi urged Indians to buy local.
“All of us should follow the mantra of buying only ‘Made in India’ goods,” Modi said on Tuesday, encouraging shopkeepers to display big signs promoting domestic products. “Pressure on us may increase [from the tariffs], but we will bear it,” he added.
Goldman Sachs’ chief India economist, Santanu Sengupta, warned that sustained 50% levies could push gross domestic product (GDP) growth below 6%, from a forecast level of around 6.5%. Rival exporters from Turkey to Thailand, facing lower US tariffs, are already scooping up American buyers with offers of cheaper goods.
About 30% of India’s exports to the US – including pharmaceuticals, electronics, raw drug materials and refined fuels – worth $27.6bn, remain duty-free. But sectors like textiles, gems and jewellery, and seafood, long reliant on the American market, face shrinking order books. “At a 50% tariff, it is very difficult to export,” Sengupta said.
The effects are already visible. The Federation of Indian Export Organisations (FIEO) reported textile and apparel manufacturers in Tirupur, Delhi, and Surat had already halted production due to “worsening cost competitiveness”.
“Indian goods have been rendered uncompetitive compared to competitors from China, Vietnam, Cambodia, the Philippines, and other south-east and south Asian countries,” said FIEO president SC Ralhan.
Indian shares tumbled ahead of the tariffs, with the benchmark BSE Sensex dropping 1%, or 849 points, to 80,876 in Mumbai on Tuesday.
The US, India’s largest export market, accounts for nearly a third of shipments in key sectors such as gems, jewellery and textiles, highlighting the potential economic impact.
Even if the tariff row eases, trust in future relations with Washington is probably the biggest casualty.
“Trump has blown it. The hard work between the two countries, which inherently did not trust each other but still managed to build a solid strategic relationship, is now at risk,” said a senior Indian trade official, who requested anonymity. “It is going to take a long time to reboot, and it probably won’t happen until Trump is out.”
“At a working level, the countries must cooperate, but politically, neither can afford to appear weak,” the official added.
S Jaishankar, the external affairs minister, called Washington’s demand that New Delhi stop buying Russian crude “unjustified and unreasonable” and accused the west of hypocrisy, noting that Europe trades far more with Russia. To avoid the extra US tariff, India would have to replace about 42% of its oil imports.
While Trump has accused India of indirectly funding Russia’s war against Ukraine through its purchases of Kremlin crude, he has not taken similar action against China, another major purchaser.
He has also sought to diffuse tensions with Moscow, inviting the Russian president Vladimir Putin to Alaska for a summit earlier this month and even mooting a trilateral meeting with the Ukrainian president Volodymyr Zelenskyy as part of efforts to end Russia’s invasion of Ukraine.
Despite tensions, Jaishankar said US-India trade talks continue. “We are two big countries, we need to have conversations … the lines are not cut,” he said.
Earlier hopes for a trade deal capping tariffs at 15% were dashed after India refused to open its agriculture market to US farm goods for fear of harming the country’s poor farmers.
India has pivoted toward Russia, which it calls an “all-weather friend”, and Jaishankar travelled to Moscow recently to meet Putin, who is expected to visit New Delhi later this year. Modi will also make his first trip to China in seven years to attend the Shanghai Cooperation Organisation summit, aiming to stabilise relations after a deadly 2020 Himalayan clash put ties into a deep freeze.
“India will tiptoe toward China, but not in a full embrace. There is a trust factor from the past with China, and much history to reconcile, but the reality is that India must do business with China,” said another senior Indian official, who also asked not to be named.
“The current [Trump] administration may set a record for the highest number of own goals with a top bilateral partner over such a short period of time,” said veteran South Asia analyst Michael Kugelman.