The United States, under the leadership of President Donald Trump, has implemented a significant tariff hike on imports from India, raising the rate to 50%. This action places India, along with Brazil, as one of the two countries with the highest tariffs imposed by the U.S.
The tariffs are being implemented in two phases:
A 25% tariff came into effect on Thursday, August 7.
An additional 25% penalty tariff, levied for what the White House calls India’s role in “fueling the [Russian] war machine” by purchasing and reselling Russian oil, is scheduled to take effect on August 28.
This move puts India and Brazil at the top of a tariff chart compiled by the New York Times, with Syria following at 41% and Laos and Myanmar at 40%. Of these five, India is the largest economy.
The Rationale and Criticism
President Trump’s administration has justified the tariffs as a means to counter Russia’s aggression in Ukraine. However, this rationale has been criticized for its inconsistency. India’s government, along with several analysts, has pointed out that other major economies, including several European countries and China, continue to import Russian energy without facing similar punitive measures. In fact, U.S. Commerce Secretary Howard Lutnick has indicated that a deadline for a trade deal with China, which currently faces tariffs in the 10-30% range, may be extended.
Both Russia and China have publicly supported India’s position, with a Russian spokesperson stating that “sovereign countries have the right to choose their own trade partners.” The Chinese ambassador to India, Xu Feihong, appeared to take a veiled jab at Trump in a social media post, writing, “Give the bully an inch, he will take a mile.”
India’s and Brazil’s Response
Prime Minister Narendra Modi and Brazilian President Luiz Inácio Lula da Silva have reportedly discussed the tariffs, among other issues, in a phone call on Thursday. Modi has stated that India will not compromise on the interests of its farmers, fishermen, and dairy farmers, even if it has to “pay a heavy price” for it. Lula has also been a vocal critic of the U.S. tariffs.
Some analysts believe the tariffs are a “negotiating tactic” to gain leverage in trade talks. Shashi Mathews, a partner at the taxation firm CMS INDUSLAW, told the Financial Express that it “appears that this was more of a negotiating tactic… to gain leverage in the ongoing trade negotiations, considering the tariffs kick in 21 days later.”
The new tariffs come as President Trump is scheduled to meet with Russian President Vladimir Putin in a few weeks, where the invasion of Ukraine is expected to be a major topic of discussion. A potential deal between the two leaders could further undermine the justification for the tariffs against India.