NEW DELHI: After failing to clinch an interim trade deal, the US on Wednesday imposed a 25% reciprocal tariff (plus a penalty for doing business with Russia) on India—much to the latter’s chagrin as it was expecting it would be less than 20%. While the 25% levy, which will kick in from August 1, is lower than 26% announced earlier, the ‘Russia penalty’ means a major rise in overall levies on goods exported to the US.
India was hoping for a lower tariff of 15-20%, which could have given it an edge over many other Asian economies. But now, the country stands to lose the competitive edge over Vietnam (20% tariff), Indonesia (19%), and Japan (15%). China attracts an additional tariff of 30%.
While announcing the tariff, US President Donald Trump made no bones about his displeasure at ‘friend’ India’s high tariff regime and its close business ties with Russia. In his Truth Social post, Trump said India’s tariffs are among the highest in the world, and its non-monetary trade barriers are the most strenuous.
He was equally scathing in pointing out that India has ‘always bought a vast majority of their military equipment from Russia, and are Russia’s largest buyer of energy’ at a time when everyone wants Russia to stop killings in Ukraine.
Later, Trump said the talks with India for a trade deal were still on. “We are talking to India now. We will see what happens. It doesn’t matter too much whether we have a deal or we charge them a certain tariff. But you will know at the end of this week,” he told reporters.
A White House official said Trump slapped the 25% tariff on India because he was ‘frustrated’ with the lack of progress on trade talks.
The Indian government said that it has taken note of Trump’s statement and is studying it. It added that India attaches the utmost importance to protecting the welfare of farmers, entrepreneurs, and MSMEs, and that it will take all steps necessary to secure the national interest.
India had differences with the US during trade negotiations that went on for several months, over tariff-free imports of agricultural goods and dairy products. It also had differences with the US over tariff on automobiles, auto components, steel, etc.