As tariff tensions between India and the US deepened on Wednesday, with Washington imposing an additional 25% levy on New Delhi over purchase of Russian oil and defence equipment,bringing the combined tariffs imposed by the United States on its ally to 50%. US Treasury Secretary Scott Bessent struck a note of optimism, saying he was confident of the strength of bilateral ties.
In an interview to Fox Business, Bessent said, “India is the world’s largest democracy, the US is the world’s largest economy. At the end of the day, we will come together.”
On the status of a trade deal, however, he admitted progress had been slow. “We still don’t have a deal. I thought we would have one by May or June. India’s approach has been performative, and while they began negotiating soon after Liberation Day, they’ve kept us tapped along. There’s also the issue of Russian crude purchases, which they have been profiteering on,” he said.
Bessent added that while President Donald Trump and Prime Minister Narendra Modi enjoy a strong rapport at the top level, “this is a complicated relationship, and it’s not just about Russian oil.”
A PTI report cited government sources in New Delhi saying, "communication channels remain open between India and the US and efforts will continue to resolve the ongoing tariff issue," government sources said on Wednesday.
"The impact (of the tariffs) is unlikely to be as severe as feared given the diversified nature of Indian exports," the sources said, adding the communication lines are open between India and the US to resolve the issue.
The sources further said that there is no cause for panic as far as exporters are concerned, stressing "it is a temporary phase in a long-term relationship" between India and the US.
While Trump has slapped fresh duties on allies and competitors alike since returning to the presidency in January, this 50-percent level is among the highest that US trading partners face.
Crucially, however, exemptions remain for sectors that could be hit with separate levies, such as pharmaceuticals, computer chips and smartphones.
Industries that have already been singled out, such as steel, aluminum and automobiles, are similarly spared these countrywide duties.
The United States was India's top export destination in 2024, with shipments worth USD 87.3 billion.
But analysts have cautioned that a 50-percent duty is akin to a trade embargo and is likely to harm smaller firms.
Exporters of textiles, seafood and jewelry were already reporting cancelled US orders and losses to rivals such as Bangladesh and Vietnam, raising fears of heavy job cuts.
Indian exporters have called for urgent government support after the United States pressed ahead with steep tariff hikes on Indian goods, even as Prime Minister Narendra Modi pledged self-reliance and lower taxes to cushion the blow.
Ajay Sahai, director general of the Federation of Indian Export Organisations, told news agency AFP the sector needs “liquidity support from the government.”
“We want to ensure that even if business stops, we are able to keep workers on the payroll,” he said, while expressing optimism that trade talks with Washington could still make progress.
In his Independence Day address, Modi promised to lower the tax burden on citizens and reiterated his push for atmanirbharta (self-reliance), vowing to safeguard India’s interests.
India has defended its decision to buy Russian crude, pointing out that traditional suppliers shifted exports to Europe after Moscow’s invasion of Ukraine. The foreign ministry noted that Washington had itself encouraged such imports at the time to help stabilise global energy markets.
Russia supplied nearly 36% of India’s crude oil in 2024, saving the country billions of dollars and keeping domestic fuel prices relatively stable.
But the Trump administration has pressed ahead with punitive duties, which came into effect on Wednesday. Trump’s trade adviser Peter Navarro went so far as to accuse India of refusing to recognise its role in “the bloodshed” and claimed New Delhi was “cozying up to Xi Jinping.”
Wendy Cutler of the Asia Society Policy Institute told news agency AFP that India had gone from being “a promising candidate for an early trade deal to a nation facing among the highest tariffs.” The former US trade official warned that the measures had “quickly eroded trust between the two countries, which could take years to rebuild.”
Trump has frequently used tariffs as a policy tool, targeting what Washington terms unfair trade practices and imbalances. Higher duties rolled out in early August have already hit economies from the European Union to Indonesia.
The 79-year-old Republican has also aimed at countries for political reasons. Brazil, for instance, saw US tariffs on many of its goods surge to 50% this month — albeit with exemptions — after Washington raised concerns over the trial of former president Jair Bolsonaro, accused of plotting a coup.
(With inputs from AFP)
