US Tariff on Indian Exports
The US President implemented a 25% tariff on Indian exports, followed by an additional 25% duty on Russian crude oil imports effective August 27. This move places India in a challenging position, as the tariffs are linked to India's purchase of Russian oil, argued to be indirectly funding the Ukraine war.
US Sanctions on Russia
- The US and allies initially imposed sanctions on Russia, including seizing foreign reserves and cutting off international payments, in response to Russia's invasion of Ukraine.
- Despite support for Ukraine, these measures did not deter Russia.
India's Trade Dynamics
- India runs a current-account deficit, importing more than it exports.
- It had a substantial trade deficit with China and a surplus with the US in 2024-25, highlighting the complexities of global trade.
Impact of High Tariffs
- India is now among the countries facing the highest US tariffs.
- Previous negotiations for a beneficial trade deal with the US did not succeed, resulting in high tariffs.
- The additional tariffs may exclude Indian exporters from the US market, especially in sectors like pharma and electronics.
Strategic Response
India should maintain engagement with the US to negotiate terms, including a possible gradual reduction in Russian oil imports, without compromising its strategic interests. It is crucial for India to enhance competitiveness and explore new markets as a long-term strategy.
