Thursday, July 31, 2025

Trump says goods from India will face 25% tariff from Aug 1 and an additional penalty for non tariff barriers

Date:

US President Donald Trump has announced a 25% tariff on Indian imports, accompanied by additional penalty tariffs related to India’s trade and defence ties with Russia. The tariffs are set to take effect from August 1.A recent SBI study warned that a 20% flat tariff on Indian exports could result in a 50 basis points (0.5%) loss to India’s GDP. Hence, a 25% tariff will lead to a major impact. The study also highlighted that every 1% increase in tariffs may lead to a 0.5% decline in export volumes, underscoring the potential negative impact of higher trade barriers on the country’s economic growth.


In a statement, Trump criticised India’s trade policies, saying, “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 further cited India’s continued purchase of military equipment and energy from Russia as a primary concern amid the ongoing conflict in Ukraine.

“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 — ALL THINGS NOT GOOD!” he said.

What experts have to say on Trump tariffs on India

Commenting on the development, former Finance Secretary SC Garg expressed strong views on the ongoing trade tensions with the US, stating,

“There is no way we can negotiate a deal while being boxed in like this. We may have to accept the reality and tell the US that if they don’t want to do business with us, it’s okay.”

He also questioned the practicality of buying oil from the US, citing high transportation costs. Garg added, “If we keep increasing exports at higher rates without balancing imports, the trade gap will close, and India will lose its competitive advantage.”

He added, “What we are witnessing from America is not trade; it’s blackmail.”

Jayant Dasgupta, former envoy to the WTO, said the newly announced 25% tariff by former President Trump aligns with expectations based on previous formulas, noting it “is not unexpected.”

He added that while proposals existed for tariffs as high as 500% on countries importing Russian oil, Trump’s indication of up to 100% tariffs signals potentially harsh measures. However, Dasgupta pointed out, “we are not totally dependent on Russian oil, and we can always buy from other sources.”

Despite informal commitments by India to purchase more US oil and defense equipment, tariffs were still imposed. He remains hopeful as “talks are still going on,” and Trump “has the habit of saying something and then coming down.”

India-US trade talks – A background

The US trade delegation is expected to visit India in the second half of August for the 6th round of Bilateral Trade Agreement (BTA) negotiations, sources earlier told CNBC TV18.

Despite the US deadline of August 2 for announcing new tariffs, talks will continue, with India seeking a comprehensive deal but remaining open to an interim agreement on agreed items so far.

Key discussion points include agriculture, automobiles, trade in Special Chemicals (SCOMET), and digital services.

Both countries aim to double bilateral trade to $500 billion by signing the first phase of the BTA by October 2025.

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