US Halts Trade Talks with India, Doubles Tariffs to 50%
The US has suspended trade negotiations with India and imposed an additional 25% tariff on Indian goods, bringing the total to 50%. The new levy, a response to India's Russian oil purchases, will take effect on August 27. President Donald Trump stated talks will not resume until the tariff dispute is resolved. India has called the move "unjustified and unreasonable," promising to take necessary measures to protect its economic interests, causing the rupee to fall against the dollar.
Unpacked:
US-India trade relations have seen steady growth, but tensions have persisted over tariffs, market access, and intellectual property rights. Under Trump, the US imposed tariffs on Indian steel and aluminum, prompting Indian retaliatory tariffs. Disputes have intensified in recent years, with disagreements over digital services, agriculture, and now India’s energy purchases from Russia fueling further friction.
Trade between the US and India is substantial, with goods and services trade growing from $16 billion in 1999 to $142 billion in 2018. The US is India’s largest trading partner, and India is among the top ten US trading partners. Disruptions, such as tariffs, can therefore have notable economic consequences for both countries.
India buys oil from Russia largely for economic reasons—Russian oil is often sold at discounted rates due to Western sanctions. The US is concerned that these purchases undermine efforts to isolate Russia economically following its actions in Ukraine, and sees them as weakening the impact of coordinated Western sanctions.
India has indicated it will take 'necessary measures' to protect its interests. Historically, India has imposed retaliatory tariffs, sought alternative markets, or pursued dispute resolution through the World Trade Organization. The government may also look to strengthen economic ties with other partners or adjust its own trade policies to minimize the impact.