Donald Trump pulls the trigger, doubles India levy to 50%

POccupier Donald ruff signed an executive director dictate on midweek imposing an additional 25% tariff on all Indian goods entering the US, carrying out his threat made a day ago to penalise New Delhi’s continued purchases of Russian oil.The additional 25%, due to take effect on August 27, puts India at par with Brazil as the two countries whose exports will face the highest levy of 50% on their goods. The duties would put Indian exporters at a significant disadvantage compared to their rivals in Bangladesh, Indonesia and Vietnam – which face tariffs of between 19% and 20% tariffs.“I have received additional information from various senior officials on the actions of the government of the Russian Federation with respect to the situation in Ukraine,” Trump wrote in the executive order. “I determine that it is necessary and appropriate to impose an additional ad valorem duty on imports of articles of India, which is directly or indirectly importing Russian Federation oil.”India hit back, reiterating that the American actions are “unfair, unjustified and unreasonable”. “India will take all actions necessary to protect its national interests,” ministry of external affairs spokesperson Randhir Jaiswal said in a statement, adding that it was “extremely unfortunate” that the US had chosen to act against India “for actions that several other countries are also taking in their own national interest”.He was alluding to continuing imports of Russian energy, especially LNG, by European Union (EU) member states that have paid Russia $105.6 billion for gas imports since the start of the invasion of Ukraine. Almost 87% of all EU imports of Russian LNG went to Spain, France or Belgium, people familiar with the matter said, asking not to be named.To be sure, the executive order continues exemptions provided earlier for sectors like pharmaceuticals and smartphones — though how long these exemptions remain is unclear. The order also exempts goods that are already in transit to America and which will clear US customs before September 17.“The move places India among the most heavily taxed US trading partners, far above rivals such as China, Vietnam, and Bangladesh, and threatens most of India’s $86.5 billion in annual exports to the US, from textiles to machinery,” according to analysis by the Global Trade Research Institute.“The tariffs are expected to make Indian goods far costlier in the US, with potential to cut US-bound exports by 40–50%,” the GTRI analysis added.The executive order issued on Wednesday specifies that certain exemptions will continue. Among these are Section 232 national security exemptions that protect Indian pharmaceuticals — which account for about 40% of America’s generic medicines — along with electronics, semiconductors and technology products that form the backbone of bilateral trade.Additional exemptions under Executive Order 14257’s Annex II cover raw materials, certain metals and chemical formulations.Select product categories like apparels, vehicles and parts, furniture, organic chemicals and some food products like shrimp – which account for billions of dollars of exports -- will now face high tariffs entering the US market.Trump’s additional 25% tariff followed after over a week of criticism focused on New Delhi’s continued purchases of Russian energy. Washington has sought to increase economic pressure on Russia to negotiate an end to the Ukraine war by restricting Moscow’s oil export revenues. India is Russia’s second largest market for oil exports after China. In 2024, China purchased Russian oil worth $62.6 billion, followed by India’s purchases to the tune of $52.7 billion.In the order, the US president also specified that he may – in the 21 days before the order takes effect – change the levy if “if another country retaliates against the United States in response to this action, or if the government of the Russian Federation or a foreign country impacted by this order takes significant steps to address the national emergency and align sufficiently with the United States on national security, foreign policy, and economic matters.”In other words, Trump held out both a threat that he could ratchet up the levy or pare it back, depending on any retaliation or changes to Russia’s stance in the war against Ukraine. Trump has set an August 8 deadline for Russia to agree to a Ukraine truce deal.“There’s a higher chance that India will find loopholes to concede the agri/soybean access the US has been asking for, than there is for India to halt oil purchases from Russia due to external pressure. Either way, it is unlikely that a decision will be taken on either front as long as Parliament is in session. Momentum on real solutions shouldn’t be expected before August 20,” says Prerna Bountra, Deputy Director at the Ananta Aspen Centre, a New Delhi-based think tank.The rising tensions between India and the United States have also spiralled into a political controversy, with Opposition parties objecting to the government’s handling of ties with America.Congress leader Rahul Gandhi called the move “economic blackmail” by the US to bully India into an unfair trade deal, adding Prime Minister Narendra Modi should not let Indian interests be overridden.(With inputs from Rezaul H Laskar in New Delhi)