India-US trade deal: US president Donald Trump on Wednesday announced that India will have to pay 25 per cent tariff from August 1. Trump also said that India will have to pay an additional penalty for buying energy and arms from Russia. The 25% tariff rate announced for India is 1% less than the 26% declared by Trump in his April 2 ‘Liberation Day’ conference.
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Why Is Trump Slapping a 25% Tariff on India?
Hey there! If you’ve been following the news, you might’ve heard about US President Donald Trump announcing a big 25% tariff on Indian goods starting August 1, 2025. Plus, there’s an extra “penalty” because India buys energy and weapons from Russia. Sounds like a lot, right? Let’s break it down in simple terms to understand what’s going on and what it means for India.
I was just reading about this, and it feels like a mix of trade drama and global politics. Here’s my take on the whole situation, with all the details you need to know.
India is our friend
“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 said in a post on Truth Social.
“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 — ALL THINGS NOT GOOD! INDIA WILL THEREFORE BE PAYING A TARIFF OF 25%, PLUS A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST. THANK YOU FOR YOUR ATTENTION TO THIS MATTER. MAGA!” he said.
The US president’s announcement of extra penalties against India follows his warning giving Russia a fresh 10-day ultimatum to achieve peace with Ukraine in efforts to halt the conflict.
Russian commodities
Trump has indicated possible tariffs on Russia, potentially including secondary charges affecting nations that purchase Russian commodities, particularly oil.
The United States and its allies supporting Kyiv consider these oil transactions as implicit backing for Russia, believing they strengthen Moscow’s economy whilst undermining international sanctions.
Meanwhile, Trump’s reciprocal tariffs for countries will be effective August 1, 2025, without any further delays. Trump posted on Truth Social, “THE AUGUST FIRST DEADLINE IS THE AUGUST FIRST DEADLINE — IT STANDS STRONG, AND WILL NOT BE EXTENDED. A BIG DAY FOR AMERICA!!!”.
India-US Trade Deal Stalemate
Despite announcing the intent for a bilateral trade agreement during PM Narendra Modi’s visit to the US, the two countries have not been able to work out an interim trade deal. Five rounds of talks have taken place between officials of the two countries and a sixth round is slated to take place in August end when a US team will visit India.
Yesterday Trump had hinted that India could face tariffs between 20-25% since a trade deal had not been finalized. According to a Reuters report, Indian government officials have said that any tariffs the US may impose from August 1 are likely to be temporary in nature since talks are on to finalise a bilateral trade agreement by fall.
Trump has repeatedly called for India to open its market to US goods, but the sticky points in the trade deal talks have been agriculture and dairy sectors. India has hardened its stance on these, refusing to open them.
Why Is Trump Doing This?
I think Trump’s move is part of his bigger plan to shake up global trade. Here’s what’s driving this decision:
- Trade Deficit Frustrations: The US buys way more from India than India buys from the US. In 2024, the US imported $87 billion worth of Indian goods (like medicines and smartphones) but only sold $42 billion to India. That leaves a $45 billion trade deficit, which Trump hates. He wants India to buy more American stuff to balance things out.
- India’s High Tariffs: Trump’s been calling India the “tariff king” for years. India does charge high tariffs on some US goods—like 70% on cars or 80% on rice—to protect its own businesses. Trump says this isn’t fair and wants India to lower these barriers.
- Russia Connection: The US is upset that India keeps buying Russian oil and weapons, especially during the Ukraine war. Trump’s team, including Senator Lindsey Graham, has been pushing for tough tariffs on countries like India, China, and Brazil for this reason. They think it helps Russia’s “war machine.”
- Trade Deal Deadline: For months, India and the US have been trying to work out a trade deal to avoid these tariffs. Trump set August 1 as the deadline, but no deal was finalized. So, he’s going ahead with the tariffs to pressure India into opening its markets, especially for US agriculture and dairy products.
What’s Next?
I’m curious to see how this plays out. India’s not likely to give in easily, especially on sensitive sectors like farming. At the same time, Trump’s pushing hard for a deal that benefits the US. Here’s what to watch for:
- August Talks: A US team is visiting India in late August for the sixth round of negotiations. If they can sort out the agriculture and dairy issues, a deal might still happen.
- India’s Response: India could retaliate with its own tariffs on US goods, like it did in 2019 when Trump ended India’s trade benefits. But they might hold off to keep talks friendly.
- Global Impact: Trump’s tariffs aren’t just about India—he’s hitting dozens of countries with 15-20% tariffs. This could spark a bigger trade war, affecting prices worldwide.