President Donald Trump made good on his threat to double tariffs on imports from India to 50%, a move that could endanger relations with one of America’s most important trading partners and send consumer prices higher.
This comes just weeks after Trump instituted a new 25% baseline tariff on Indian goods. Levies on India, the world’s fifth-largest economy, are now among the highest the United States charges across all countries.
The latest round of tariffs on India seeks to punish the country for importing Russian oil and helping Russia finance its war with Ukraine, Trump has previously said.
The US leader recently held separate meetings with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy to help broker a deal to end their years-long war. However, the talks remain at an impasse.
American firms and, more recently, consumers, are already seeing higher costs resulting from Trump’s tariff campaign while the health of the labor market has deteriorated. The ramped-up levies on Indian goods could worsen both effects.
New Delhi signaled it would retaliate against Trump’s tariffs earlier this month, when Trump initially vowed to impose what he referred to as “secondary sanctions.”
India’s junior foreign minister, Kirti Vardhan Singh, told reporters Wednesday the government is “taking appropriate steps so that it does not harm our economy and let me assure you that the strength of our economy will carry us through these times.”
“Our concern is our energy security, and we will continue to purchase energy sources from whichever country benefits us,” he said.
India has accused the Trump administration of unfairly penalizing the country, pointing out that other countries that import oil from Russia aren’t facing such levies. China, for instance, is the top buyer of Russian oil, but its products face a minimum 30% tariff. Trump has warned, though, that other countries that purchase oil from Russia could face higher tariffs soon.
India’s rising importance to American businesses and consumers
The trade deficit between the US and India has widened significantly over the past decade, but it’s come as both countries roughly doubled the amount of imported goods from one another.
Last year, the United States imported $87 billion worth of goods from India, compared to about $42 billion in American goods exported to India, according to Commerce Department data. As Trump ramped up tariffs on China in his first term and earlier this year, American businesses were incentivized to seek out alternative production locations like India.
The top goods the US received from India last year included pharmaceuticals, communications equipment, such as smartphones, and apparel. Smartphones, however, are exempt from so-called “reciprocal” tariffs, which includes the 50% tax on Indian goods.
As is the case with almost all country-specific duties Trump has enacted, sectoral tariffs — such as the 50% across-the-board tariff on steel and aluminum, as well as others he’s threatened — won’t be stacked. This means that steel and aluminum products from India there will face a 50% tariff rather than a combined 100% tariff.
Meanwhile, the top American exports to India were various oils and gases, chemicals and aerospace products and parts. These industries could be among the most vulnerable if India decides to slap retaliatory tariffs on American goods.
But it’s not just physical goods that America has grown increasingly reliant on India for. On top of production centers, American companies, including American Express, JPMorgan Chase, Microsoft and Google, have deepened their footprint in India in recent years by expanding or opening new offices there.
The Indian government could respond to higher tariffs Trump imposed by making it more onerous for such companies to do business there.
