Trump confirms 25% tariff, penalty for India from Aug 1

US chairman Donald ruff proclaimed on wed that bharat will face a 25% tariff on all exports to America plus an unspecified additional penalty for purchasing Russian energy, dealing a setback to negotiations just days before an August 1 deadline for additional levies that New Delhi has been attempting to stave off.The move, which some US officials described as a negotiating tactic, could, if the tariffs last, put India at a disadvantage when compared to Asian countries such as Indonesia and Vietnam.In a combative post on Truth Social, Trump criticised India for maintaining the world’s highest tariffs and “obnoxious” trade barriers while continuing to buy Russian military equipment and energy during the Ukraine war.Also read: ‘Partially BRICS, partially trade’: Trump after slapping 25% tariffs on India“Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non-monetary Trade Barriers of any Country,” Trump wrote.“Also, they have always bought a vast majority of their military equipment from Russia, and are Russia’s largest buyer of ENERGY, along with China, at a time when everyone wants Russia to Stop the killing in Ukraine,” he added. “India will therefore be paying a tariff of 25%, plus a penalty for the above, starting on August first.” The penalty would be what Trump calls a “secondary tariff”.India’s ministry of commerce and industry said on Wednesday it had “taken note” of Trump’s statement and was “studying its implications.” The ministry said India remained “committed” to concluding a “fair, balanced and mutually beneficial bilateral trade agreement” while protecting “the welfare of our farmers, entrepreneurs, and MSMEs”.“The government will take all steps necessary to secure our national interest, as has been the case with other trade agreements including the latest Comprehensive Economic and Trade Agreement with the UK,” the statement added.White House economic adviser Kevin Hassett, in comments made shortly after Trump’s post, suggested the announcement was intended as a negotiating tactic , telling reporters that Trump was frustrated with state of negotiations.“I think President Trump is frustrated with the progress we’ve made with India but feels that a 25% tariff will address and remedy the situation in a way that’s good for the American people,” Hassett said, adding: “India might reconsider their practices”.Hassett described a potential deal with India as “an absolute game changer for the global economy” and said the White House remained “hopeful that India will open up its markets.” He added that Trump and US trade representative Jamieson Greer would provide more information “shortly” on the additional penalty announced earlier.On Wednesday, Trump separately confirmed the August 1 deadline would not be extended.The announcement comes seven months after Prime Minister Narendra Modi and Trump launched “Mission 500”—a goal to increase bilateral trade from $200 billion to $500 billion by 2030. The leaders announced plans to negotiate a first-phase Bilateral Trade Agreement by autumn 2025.Five rounds of negotiations took place between March and July, with technical teams largely concluding the framework by late June. However, talks remained deadlocked over three core issues: agricultural market access, tariff reciprocity, and ongoing WTO disputes.In recent days, Trump has sought to pressure President Vladimir Putin towards a peace deal to end the Ukraine war through expanded trade measures rather than traditional sanctions.India was originally slated to be slapped with duties of 26%, including a 10% baseline that Trump announced as part of his “liberation day” trade policy.New Delhi and Washington have since stepped up negotiations.A team of Indian negotiators led by Special Secretary Rajesh Agrawal concluded talks in Washington from July 14-17 without reaching a first-phase agreement, even though India avoided receiving a formal “trade threat” letter earlier this month—which had seemed to indicate a deal was close.Trade talks foundered on American demands for greater market access, particularly in agriculture where US officials sought “politically-impossible” concessions from India, according to Rick Rossow, Chair on India and Emerging Asia Economics at the Center for Strategic and International Studies.US trade representative Jamieson Greer and commerce secretary Howard Lutnick have publicly stated that Trump personally demanded “completely open markets” from India—a condition New Delhi found unacceptable given its need to protect domestic livelihoods.The tariffs will disadvantage India compared to other manufacturing hubs as American businesses pursue “China+1” supply chain strategies. Trump has recently struck more favourable trade deals with the European Union (15% tariffs), Japan (15%), Indonesia (19%) and Vietnam (20%).“As the United States and India increasingly focus economic ties on economic security and supply chain diversification, a 25% reciprocal tariff with the threat of additional penalties puts India at a disadvantage,” said Aman Thakker, vice president at the Asia Group.Electronics manufacturing, where India has attracted investments from companies like Apple, could face particular pressure from the higher tariff rate compared to alternative locations.“India will do whatever it can to strengthen commercial relations with the US but not at the cost of making fuel or electricity unaffordable for millions of its citizens,” said Prerna Bountra, deputy director at the Ananta Aspen Institute.She noted the irony of American pressure given continued US imports of Russian uranium, adding: “An American administration voted in by an electorate frustrated by the price of eggs and gas shouldn’t be too surprised when India picks keeping its prices low over making nice.”The tariffs affect India’s $86.5 billion worth of goods exports to America, making the US India’s largest trading partner despite the escalating trade tensions.While both economies are primarily services-driven, limiting direct impact on most jobs, experts warn of broader relationship damage. “The larger impact will be a further loss of trust in the relationship,” Rossow said, cautioning that such policy shifts could constrain cooperation in defence and other strategic areas.“Despite the unpredictable policy making of the US, the market was expecting a tariff deal to work out as longer-term US-India strategic interests are aligned,” said Nilesh Shah, MD of Kotak Mahindra AMC. “Markets will hope for a ‘TACO’ trade if better senses prevail,” Shah added, referring to a global trade trend where markets have risen despite Trump’s threats, a defiance dubbed as “Trump will always chicken out”, or TACO.Madhavi Arora, economist, Emkay Global, added: “We see it more from the lens of geopolitics than purely economics and see both sides striving to get the deal done, even as the power equations may change a bit in US favour.”