Trump imposes 50% tariff on imported Indian goods, potentially endangering jobs and trade relations

The Indian government is finding itself in a delicate situation, as the United States imposes tariffs on Indian goods, pushing New Delhi to strengthen trade relations with the United Kingdom and the European Union. Amidst this, India has signed a free trade agreement with the UK and is negotiating one with the EU, aiming to diversify its trade partnerships beyond the US.

However, the tariff war between the two nations could shave nearly 1% off India's GDP, amounting to approximately $36 billion. This harsh trade measure, one of the harshest taken by the US in recent years, is expected to impact trade worth billions of dollars and jeopardize hundreds of thousands of jobs in India.

The White House has justified the tariff due to India's continued imports of Russian oil, despite repeated US warnings. The US administration argues that these imports indirectly fund Moscow's war against Ukraine. However, India insists its decisions are based on market needs for its 1.4 billion citizens and accuses Washington of double standards, given that Europe and China continue to import Russian energy.

The tariff is likely to hit labor-intensive industries in India hard, with exports in sectors such as textiles, garments, gems and jewelry, shrimp, leather goods, carpets, and handicrafts seeing losses of up to 70 percent. Small businesses in these sectors may collapse due to the tariff, with buyers shifting to Vietnam, Bangladesh, Pakistan, and other Asian economies.

Prime Minister Narendra Modi has vowed to protect affected industries, promising tax breaks, subsidies, and financial aid for exporters. However, economists warn that subsidies will not be enough to offset the massive losses. The government is exploring new markets in Latin America and the Middle East, and additional tax incentives, salary hikes for state employees, and financial relief for pensioners are in the pipeline to soften the blow.

The tariff may lead to straining of ties between Washington and New Delhi, which shared $212 billion in annual bilateral trade until recently. Analysts warn that trust between Washington and New Delhi is at "an all-time low," with India increasingly tilting towards BRICS and other non-Western blocs. The tariff war risks pushing India closer to its traditional partners, with New Delhi preparing to welcome Russian President Vladimir Putin.

Trump has criticized India for its high import duties, particularly in agriculture, where tariffs average 39 percent compared to the US's 4 percent. Despite five rounds of negotiations, talks between the US and India collapsed after India refused to halt its Russian energy purchases.

Despite these challenges, India has recently taken steps to improve relations with China, with whom it has $136 billion in trade. The Indian government is hopeful that these issues can be resolved through dialogue and cooperation, maintaining that its primary focus is on the welfare and prosperity of its citizens.

The Indian government and industry leaders are urging the US to reconsider its tariff policy, emphasizing the potential harm to both economies and the strategic partnership between the two nations. As the situation unfolds, it remains to be seen how this tariff war will shape the future of trade relations between India and the US.

Trump imposes 50% tariff on imported Indian goods, potentially endangering jobs and trade relations