NEW DELHI: India’s economy is grappling with the immediate fallout of new tariffs imposed by the U.S. administration, led by President Donald Trump. A 25% additional duty on Indian imports, which took effect on Wednesday, August 27, has doubled the total tariff to 50% and triggered a decline in the Indian stock market.
Tariffs Spark Market Tumble and Government Action
In a direct response to the new tariffs, India’s benchmark stock indices, the BSE Sensex and NSE Nifty, both dropped on Thursday, a day after the market was closed for a public holiday. Stocks in key sectors like textiles, leather, gems, and jewelry were the hardest hit, as these industries are a primary target of the new duties.
In a relief measure for the country’s textile industry, which is particularly vulnerable, the Indian government extended the exemption of import duties on cotton until December 31. This move is aimed at “augmenting the availability of cotton for the Indian textile sector,” according to a Press India Bureau release.
The government has indicated that while it is taking steps to mitigate the harm to the economy, there is “no cause for panic.” Minister of State for External Affairs Kirti Vardhan Singh assured reporters that India’s economic strength would help it weather the storm. A report from the finance ministry also noted that while the immediate impact may be limited, the “secondary and tertiary effects” on the economy pose challenges.
White House Officials Blame India’s Russian Oil Purchases
The Trump administration has attributed the tariff hike to India’s continued purchase of Russian oil. U.S. Treasury Secretary Scott Bessent acknowledged the “very complicated” relationship between the two nations but expressed confidence that they will “eventually come together.” However, he also accused India of “profiteering” from Russian energy sales and “tapping us along” on trade talks.
In a more direct attack, White House trade adviser Peter Navarro called the Ukraine conflict “Modi’s war” in a Bloomberg interview, asserting that India is helping to “feed the Russian war machine” by buying discounted crude. He claimed that because of India’s actions, American taxpayers have to fund the conflict, stating, “Everybody in America loses because of what India is doing.”
Ongoing Diplomatic Tensions
The new tariffs come after a period of escalating trade and diplomatic tensions. Prior to the tariffs, President Trump had described Prime Minister Modi as a “terrific man” but also claimed to have warned both India and Pakistan that he would impose “head-spinning” high tariffs on them.
India has yet to issue an official government statement in response to the tariffs, though officials have stated that diplomatic channels remain open. The retaliatory tariffs have placed a new strain on a relationship that has seen both cooperation and conflict, particularly over trade issues and India’s position on Russian energy.