Steep US tariffs set to hit Indian exports from Aug 27
An additional 25 per cent duty takes total tariffs to as much as 50 per cent.
NEW DELHI: Indian exporters are bracing for a sharp decline in US orders as Washington confirmed steep new tariffs on the South Asian nation’s goods will take effect on Wednesday (Aug 27), escalating trade tensions between the two strategic partners.
An additional 25 per cent duty announced by President Donald Trump, and confirmed in a notice by the US Department of Homeland Security, takes total tariffs to as much as 50 per cent, among Washington’s highest, in retaliation for New Delhi’s increased purchases of Russian oil.
“The government has no hope for any immediate relief or delay,” said a commerce ministry official, who declined to be named. The ministry has promised exporters financial assistance and incentives to diversify into other markets, including China, Latin America and the Middle East.
MARKETS REACT
The Indian rupee fell to a three-week closing low of 87.68 against the dollar, while benchmark equity indexes closed down 1 per cent each, their steepest daily fall in three months.
The new duties will apply from 12.01am EDT on Wednesday (9.31am IST), with exceptions for shipments in transit, humanitarian aid and items under reciprocal trade programmes.
Wednesday’s move follows five failed rounds of talks. Indian officials had hoped tariffs could be capped at 15 per cent. Instead, both sides have traded blame for political misjudgments that derailed negotiations despite two-way trade worth more than US$190 billion.
WASHINGTON BLAMES OIL IMPORTS
White House trade adviser Peter Navarro and US Treasury Secretary Scott Bessent have accused India of indirectly funding Russia’s war by boosting oil imports. Bessent said this month that Russian oil made up 42 per cent of India’s purchases, compared with less than 1 per cent before the invasion of Ukraine.
Trump has argued that the tariffs add pressure on Russian President Vladimir Putin to make peace, though he has not imposed similar measures on China, another major buyer of Russian oil.
The stand-off has raised concerns about wider US-India ties, even as both governments call each other key security partners balancing China’s influence in the Indo-Pacific.
EXPORTERS FEAR HEAVY LOSSES
Exporter groups estimate the hikes could affect nearly 55 per cent of India’s merchandise exports to the US, worth about US$87 billion, while competitors such as Bangladesh, China and Vietnam could benefit.
“The US customers have already stopped new orders,” said Pankaj Chadha, president of the Engineering Exports Promotion Council. “Exports could fall by 20 to 30 per cent from September.”
India’s diamond industry, which sends nearly a third of its US$28.5 billion in annual shipments of gems and jewellery to the US, has already hit a two-decade low on weak Chinese demand.
DIPLOMATIC MESSAGES
Despite the trade dispute, the US State Department and India’s Ministry of External Affairs said senior officials held virtual talks on Monday, stressing “eagerness to continue enhancing” the relationship.
The two sides discussed defence cooperation, trade and investment, energy security, critical minerals and counter-terrorism. They also reaffirmed their commitment to the Quad grouping with Australia and Japan, which is expected to meet at leader level later this year.
Indian Prime Minister Narendra Modi has vowed not to compromise the interests of farmers “even if it entails a heavy price.” He is due to visit China at the end of the month, his first trip there in seven years, as he seeks to strengthen other international ties.
