The US has taken a brave step forward in its trade policy. Recently, this government has enacted an unprecedented 50% tariff on imports from India, surcharging one of the highest tariffications in U.S. history. This decision comes hard on the heels of President Donald Trump’s effort to double tariffs on Indian products. His moves have deepened a crisis in the state of U.S. relations with trading partners.
Other than the laborious-to-list UK-made products, the tariff covers the gamut. Smartphones would be exempted from the 50% tax. Steel and aluminum products that are imported from India will experience the greatest effect of the new duty. In 2022, the United States’ goods imports from India amounted to approximately $87 billion. Our largest imports were pharmaceuticals, communications equipment and apparel. These items are now facing much higher costs because of the new tariff.
Just last week, President Trump met separately with both Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy. This trade action created a backdrop for those high-level discussions. In each of these appearances, he went further to repeat his warning that countries buying Russian oil will soon start paying higher tariffs. For one thing, China—the largest buyer of Russian oil—is suddenly facing a conservative 30%-plus effective tariff on its goods. This scenario is a consequence of continuing lackluster trade negotiations.
For Indian goods, tariffs are almost universally seen as a punitive strike. Their goal is to pressure India to stop importing Russian oil, and otherwise not supporting Russia while it continues its war on Ukraine. U.S. goods trade deficit with India has grown massively over the last 10 years. That’s a remarkable change, especially considering that both countries have more than doubled their respective import volumes from each other over this period. Last year, the American exports that were sent to India came to nearly $42 billion. They enjoyed solid exports in oils, gases, and chemicals as well as finished aerospace products and parts.
Trump’s tariff campaign has drawn criticism from strange company on the right. American businesses and consumers are paying the price while American companies wrestle with the burdens of new tariffs. Increasing the tariff on Indian imports from the present level to 50% is sure to exacerbate all three challenges above. Second, and perhaps more importantly, this contentious relationship will reshape the U.S.-India trade relations.