President Trump appears increasingly dissatisfied with the ongoing months-long trade negotiations between the US and India, citing India’s trade relations with Russia, and has threatened to impose “punishments” such as tariffs on India starting next month.
According to CCTV News, Trump announced via social media on July 30 that the US will impose a 25% tariff on Indian goods imported into the US starting August 1 and implement other “punishments.” Trump posted complaining that India’s tariff rates are too high and its non-tariff barriers are “heavier and more annoying” than any other country, leading to the maintenance of a small-scale US-India trade for many years. He then posted, “We have a huge trade deficit with India.”
Trump’s post stated that India’s tariffs “are among the highest in the world, and its non-monetary trade barriers are the strictest and most annoying of all countries.” He specifically pointed out that India “has been buying the vast majority of its military equipment from Russia” and is also “one of Russia’s largest energy buyers.”
After Trump issued new threats, Indian officials said that the Indian government is still in contact with the United States to ensure a mutually beneficial trade agreement. Later, India said that the government has received Trump’s statement. India will take necessary action to ensure its national interests. The impact of the U.S. tariffs announced by Trump is being studied.
Trump’s chief economic advisor, White House National Economic Council Director Hassett, said he hopes India will open its market to the United States. Trump is frustrated with the progress made between the U.S. and India. The 25% tariffs will address and fix the situation on India’s side. He expects India may lower its prices to the U.S. and reconsider its actions.
After Trump announced the tariffs and other “punishments,” the Indian Rupee exchange rate accelerated its decline. In pre-market U.S. stocks, the U.S. dollar to Rupee in offshore trading once fell to 87.87, hitting a five-month high, and rose by about 0.8% intraday. Indian Nifty 50 futures erased gains, with a decline of 0.5%.
Trump’s “punitive” decision marks the formal breakdown of months-long trade negotiations between the US and India, as India failed to secure lower tariff treatment similar to that of other trading partners like Japan and the EU (15%-20%). This tariff measure could further damage US-India relations and weaken America’s previous efforts to cultivate India as a counterbalance to other Asian powers.
Tariff levels higher than other trading partners
The 25% tariff imposed by Trump on India is significantly higher than the treatment received by other major trading partners. Media reports indicate that according to the trade agreements announced by the Trump administration so far, the US will impose a 20% tariff on Vietnam, a 19% tariff on Indonesia, and only a 15% tariff on both Japan and the EU, which will put India at a clear disadvantage in competition.
Alexandra Hermann, an analyst at Oxford Economics in London, stated, “India’s export prospects and investment attractiveness will be harmed, and the situation would be more severe if exemptions for industries such as smartphones and other electronic products are gradually lifted.”
Madhavi Arora, an economist at Emkay Global Financial Services, believes that although the trade negotiations between the two countries seem to have broken down, “trade disputes and transaction negotiations do not necessarily end,” and these trade negotiations, apart from purely economic perspectives, also have a global geopolitical angle.
The United States is India’s largest trading partner and largest export market. Xinhua News Agency mentioned that according to U.S. Department of Commerce data, the bilateral goods trade volume between the U.S. and India was approximately $128.8 billion in 2024, with India having a trade surplus of $45.8 billion with the U.S.
Russia’s Energy Trade Becomes a Focal Point of Controversy
The main reason for Trump’s additional “punishment” against India is India’s continued purchase of energy and military equipment from Russia. According to Kpler data, more than one-third of India’s oil imports this year come from Russia, and about 36% of its weapons are imported from Russia.
This “punitive” measure echoes Trump’s earlier threats earlier this month, that countries buying Russian oil and natural gas would face 100% secondary tariffs unless the Kremlin reaches a ceasefire agreement with Ukraine.
Bank of America emerging markets economist Brendan McKenna warned that India’s reliance on Russian energy means “switching to new suppliers could negatively impact India’s current account and inflation expectations, and dampen sentiment towards local markets.”
Negotiations Stalemate, Agricultural Divides Hard to Resolve
US-India trade negotiations have stalled in key areas such as agriculture and dairy products. The media believes that the United States has long pushed for greater access to India’s agricultural sector, viewing it as a major untapped market, but India firmly protects the sector on the grounds of food security, livelihoods, and the interests of millions of small farmers.
Media reported on Wednesday, citing officials, that the United States recently reached trade agreements with Japan and the European Union before the new reciprocal tariffs take effect on August 1, which emboldened Trump. In recent days, Trump has reviewed the draft US-India agreement, with the commitment to ensure market access for US producers becoming a focal point, posing a major obstacle to the prospects of the US-India agreement. India is willing to compromise partially, while Trump hopes to completely or as close to completely as possible eliminate trade barriers.
Indian Commerce Minister Piyush Goyal told the media last week that the agricultural sector is sensitive to India and will ensure the “good protection” of farmers’ interests. US Trade Representative Grier recently admitted that India’s trade policy “has long been protectionist,” “prioritizing the strong protection of its domestic market.”
Although India has reduced tariffs on a series of goods including Bourbon whiskey and motorcycles, the United States still had a trade deficit of $45.8 billion with India last year, which Trump hopes to reduce. The two countries had previously set a goal to double bilateral trade from $190 billion to $500 billion.
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