By Fawzia Moodley:
Donald Trump has slapped tough tariffs on India, which is bracing for even more punishing trade levies from the world’s most powerful country. On August 6, the US imposed an additional 25% to the 25% tariffs already announced by Trump against India, to come into effect in 21 days.
Unless there is a breakthrough in negotiations, the resultant 50% tariffs will be among the highest imposed by the US on any country so far. Prime Minister Narendra Modi, who has enjoyed cordial relations with Trump until now, was understandably taken aback by the harsh measures, and India, while hoping for a thaw in Trump’s stance, is bracing itself for the impact of the 50% tariffs on its economy.
The new tariff regime will hit all Indian products entering the US, which according to one analyst, buys nearly a fifth of what India exports (worth $87 billion last year), are bound to hit hard; but some pundits, including Sonal Badhan of the Bank of Baroda, and Hemant Jain of the PHD Chamber of Commerce and Industry (PHDCCI) believe that the country’s sound domestic fundamentals will cushion the impact of the high tariffs. The PHDCCI released a White Paper, projecting that while the tariffs would affect about $8.1 billion worth of exports to the US, the overall impact on India’s economy would be limited.
Jain, the President of the PHDCCI, said the world’s fastest-growing economy, with a projected growth of 6.4% in 2025/2026, would not be overly affected by the sharp US tariffs. “Our analysis indicates that there will be an estimated impact of only 1.87% on India’s total global merchandise exports and a negligible 0.19% on India’s GDP.”
Badhan, an Economics Specialist at the Bank of Baroda, in an exclusive interview with ANI news agency, was equally confident of India being able to ride the tide of the harsh US tariffs. While acknowledging that the tariffs could impact India’s export sector, she was confident that the “overall investment sentiment” would remain stable due to strong domestic consumption trends. Badhan added that India’s services exports, which were not affected by the tariffs, would cushion the current account deficit (CAD). “Impact on current account deficit will be cushioned by our services exports, which remain beyond the reach of tariffs so far. International oil prices are also low, which will further help CAD to remain range-bound,” she told ANI.
Indian politicians, industrialists and the general public are understandably rattled by Trump’s shockingly high tariffs on a country hitherto regarded as a US ally. Trump has been using tariffs as a bargaining chip against countries that he believes have treated the US unfairly, or whose policies (according to him) are antagonistic towards his country’s interests. He dubbed the initial 25% against India as “reciprocal tariffs”. Trump justified the imposition of the (latest) additional 25% tariffs due to come into effect by the end of August, as punishment for India purchasing oil from Russia, in defiance of US sanctions against Moscow.
While many countries faced with Trump’s harsh tariffs have been toenadering with the US, striking deals with him to avoid massive tariffs, Modi, who has always spoken warmly of his relations with the US and Trump in particular, has pushed back against the new tariffs, which he regards as unfair. Many Indians are angry at Trump’s 50% tariffs, which they regard as unjustified, especially since the US and Europe still trade with Russia on products such as fertilizers and chemicals. Union Minister Rajnath Singh reflected the feeling on the ground, in his recent comments on the US tariffs, during an event in Madhya Pradesh, said: “There are some people who are jealous of India’s rapid development. They think, ‘we are the boss of all.’ They cannot accept how quickly India is moving ahead.”
As aggrieved as Indians may feel, the reality is that the US is a significant trading partner and Trump’s demand for the country to desist from buying oil from Russia poses a problem for New Delhi, whose economy is highly dependent on its exports to the US, which were estimated to be around $77.5 billion in 2024. At the same time, India, the third largest consumer of oil in the world, cannot easily extricate itself from its dependence on Russia, which is its largest crude oil supplier.
India is not the only country to be caught in what many regard as Trump’s vengeful tariffs. Brazil and South Africa are among the countries that have fallen victim to the US’s trade war. While the US has dubbed the hefty 30% tariffs imposed by the White House against South Africa as “reciprocal”, Pretoria has challenged this notion, saying this was not reflective of available trade data. There is a strong suspicion that the country is being punished for invoking the US president’s wrath by taking Israel to the International Court of Justice (ICJ) for committing genocide in Palestine. The US President is also believed to be influenced by his (false) conviction that White farmers in South Africa are the victims of genocide, which President Cyril Ramaphosa of South Africa publicly disputed during a meeting with Trump at his Oval Office recently. – @NewsSA_Online