By Atoyebi Nike
US President Donald Trump has announced a new 25% tariff on goods imported from India, citing the country’s ongoing trade with Russia as the reason. The move, which could include unspecified penalties, is set to take effect on August 1 and is already sparking concern among Indian economists and industry leaders.
In a post on Truth Social, Trump criticized India for buying Russian oil and arms “at a time when everyone wants Russia to stop the killing in Ukraine.” The decision threatens to hit India’s key exports textiles, leather, pharmaceuticals, and marine products while impacting investor sentiment.
Experts say the tariffs could reduce India’s GDP growth by 0.2% this year. Rating agency ICRA already revised India’s growth forecast downward from 6.5% to 6.2% in response to earlier tariff concerns. Nomura called the announcement “growth negative.”
Markets reacted swiftly, with stocks opening lower. Nilesh Shah, a fund manager, said investors had hoped for a deal given the growing US-India strategic partnership.
Trade tensions have simmered for months. India had cut tariffs on several American products, including whiskey and motorcycles, but failed to satisfy US trade demands. The US still runs a $45 billion trade deficit with India.
“Imposing a 25% tariff and further penalties will make India less competitive compared to Vietnam and China,” said Rahul Ahluwalia of the Foundation for Economic Development.
Agneshwar Sen, trade policy expert at EY India, warned of direct impacts on India’s most robust trade sectors, while Indian exporters are bracing for tough price renegotiations with American buyers.
India’s commerce ministry said it is assessing the implications of the announcement. It reiterated the country’s focus on protecting farmers, MSMEs, and politically sensitive sectors such as agriculture and dairy.
Opposition leaders blasted the Modi government, calling it a “catastrophic failure” of foreign policy. Congress cited Modi’s past public show of support for Trump, accusing the government of diplomatic naivety.
Despite rising tensions, trade talks are set to continue into August. A US delegation is expected in India to iron out a deal before a fall deadline.
“Trump’s decision complicates the negotiations by linking them to India’s Russia ties,” said Mark Linscott, former US trade official. Still, he and others believe both nations have incentives to resolve their differences.
The US remains India’s top export destination, with bilateral trade reaching $190 billion. Both countries aim to increase that to $500 billion.
