U.S. Imposes 50% Tariffs on Indian Goods

Standoff on Trade: U.S. Imposes 50% Tariffs on Indian Goods

Overview

• Tariff escalation confirmed: The U.S. is doubling its tariffs on Indian imports—from 25% to a staggering 50%, effective August 27. This move is a direct response to India's persistent purchase of Russian oil, which Washington claims indirectly supports the war in Ukraine.
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• Targets and exclusions: Sectors likely to bear the brunt include textiles, gems, leather, machinery, and marine products. Notably, electronics and semiconductors are exempt.
  Indiatimes

Domestic Fallout in India

• Financial markets react: The Indian rupee tumbled, while the major stock indexes (Sensex, Nifty) slid—reflecting mounting uncertainty.
  Yahoo Finance

• Growth under threat: Analysts predict GDP could take a hit of 0.8 percentage points annually, with factory exporters expecting 20–30% export declines post-September.
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• Government response:

  • The Reserve Bank of India (RBI) confirmed readiness to "hunker down" and enact measures to cushion the economy against prolonged turbulence.
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  • Prime Minister Modi, invoking the “swadeshi” (self-reliance) ethos, urged Indian citizens and businesses to bolster domestic industry and resist external pressure. Exporter groups are also urged to explore new regions like China, Latin America, and the Middle East.
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• Calls for reform: Business leader Uday Kotak labeled the tariff shock a once-in-a-generation opportunity, encouraging reforms to boost manufacturing and innovation.
  Financial Times

Evolving Diplomacy

• Negotiations continue: Despite the tension, India’s Foreign Minister Subrahmanyam Jaishankar confirmed that trade talks with the U.S. are still underway, with India placing strong emphasis on protecting interests of farmers and small businesses.
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• Strategic realignments emerging:

  • At a broader level, India has strengthened ties with China and Russia, easing trade restrictions and expanding diplomacy—further signaling a shift in global alignments.
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• Diplomatic flashpoint: This tariff escalation marks one of the most severe bilateral trade disputes in decades, putting immense strain on the traditionally robust U.S.–India strategic partnership.