In a stunning and punitive move, President Donald Trump has brought down a crushing 50 percent tariff on Indian goods, a direct punishment for the country’s continued purchase of Russian oil.
The decision, which went into effect on Wednesday, upends a decades-long strategic push by Washington to cultivate New Delhi as a vital counterweight to China and marks a perilous new chapter in a rapidly deteriorating relationship.
The new tariffs, which double the existing 25 percent duty, are now the highest in Asia.
They will directly impact more than 55 percent of all goods shipped to the United States—India’s single biggest market—and are poised to inflict maximum pain on labor-intensive industries like textiles, jewelry, and footwear.
For now, key sectors like electronics and pharmaceuticals are exempt, sparing Apple’s massive new factory investments a direct hit.
A ‘strategic shock’ to a manufacturing dream
The sky-high tariffs have sent a shockwave through the Indian economy, threatening its export competitiveness and raising profound questions about Prime Minister Narendra Modi’s ambition to transform the nation into a global manufacturing hub.
Exporters are already bracing for the fallout, warning of a cascade of falling orders and the grim prospect of mass job cuts.
“This is going to be a very big impact on Indian exporters because 50% tariffs are not workable for the clients,” Israr Ahmed, managing director of Farida Shoes Pvt. Ltd., which depends on the US for 60 percent of its business, told Bloomberg.
He revealed that American buyers are already asking for product specifications to be shared with suppliers in rival nations like Bangladesh and Vietnam, a clear and immediate threat.
The move has stunned Indian officials, who have called the US actions “unfair, unjustified and unreasonable.” The country’s Ministry of Commerce and Industry did not respond to a request for comment.
The unraveling of a partnership
The tariff hammer is the culmination of months of simmering tensions.
While India was one of the first countries to open trade talks with the Trump administration, its own protectionist policies have long frustrated US negotiators.
Relations soured dramatically after Trump began lashing out at India over its energy ties with Moscow, accusing New Delhi of funding Vladimir Putin’s war in Ukraine.
Now, this fraying relationship appears to be pushing India away from the West and into a closer embrace with the BRICS bloc.
In a significant geopolitical shift, New Delhi and Beijing have been actively working to patch up a relationship that had plummeted after violent border clashes in 2020.
Modi is now expected to meet with President Xi Jinping at a security summit in China next week—his first visit in seven years.
Simultaneously, India and Russia have pledged to increase their annual trade by 50 percent to 100 billion dollars.
The economic fallout is already being priced in. India’s currency and bond markets slumped ahead of the new levies, with the rupee now the worst-performing currency in Asia this year.
Foreign investors have already pulled almost 5 billion dollars from Indian stock markets since July.
Citigroup Inc. estimates that the new tariff poses a 0.6 to 0.8 percentage point downside risk to India’s annual GDP growth.
While India’s large domestic economy may cushion some of the blow, the nation now finds itself navigating a treacherous new economic and geopolitical landscape.
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