Explainer: India’s firm but measured response to Trump’s tariff hit-list

At 50 per cent, India and its ally Brazil top the list of countries hit by tariffs imposed by US President Donald Trump in his latest executive order on the subject. For India, which has emerged as one of the US’ most important strategic partners in the Indian Ocean Region, this includes a 25 per cent additional levy as penalty for importing oil from Russia, with which India has deep historical ties.

In his order of August 6, titled “Addressing Threats to the US by the Russian Federation”, Trump has invoked his constitutional powers to claim that Russia and Russian products posed an “unusual and extraordinary threat to the national security and foreign policy of the United States”.

“To deal with the national emergency described in Executive Order 14066, I determine that it is necessary and appropriate to impose an additional ad valorem duty on imports of articles of India, which is directly or indirectly importing Russian Federation oil,” the order states.

Executive Order 14066, issued in March 2022, pertains to prohibiting certain imports and new investments with respect to continued Russian federation efforts to undermine the sovereignty and territorial integrity of Ukraine.

The order of August 6 has an annexure that contains a list of 70 countries and the tariffs applicable to them. Countries not mentioned in the list attract a baseline tariff of 10 per cent. Noticeably, India is the only country mentioned in the test of the order.

“As consistent with applicable law, articles of India imported into the customs territory of the United States shall be subject to an additional ad valorem rate of duty of 25 per cent, it states. The ad valorem (according to value) duty is in addition to any other duties, fees, taxes, exactions and charges applicable to such imports except those exempted.

While Trump is citing India’s imports of Russian oil as the reason for high tariffs, some experts are of the view that there could also be other factors in the realm of geopolitics and domestic affairs behind the move.

From seemingly supporting Russia in the ongoing war with Ukraine during the early days of his second term, Trump, facing flak at home over his policies, economic concerns and negative approval ratings, has now threatened to impose sanctions on Russia and upped the nuclear ante.

Trump has also claimed that he brokered a ceasefire between India and Pakistan after a brief but intense military clash in May this year that has been vehemently denied by the Indian Government. After his claims, he hosted Pakistan’s Army Chief to lunch at the White House and appears to be firming up relations with the country that has for long been viewed as a state sponsor of terrorism.

India’s ties with Russia

India is the third-largest importer and consumer of oil in the world, importing about 1.75 million barrels per day of Russian oil in January-June this year, according to industry reports. Russia had been India’s top oil supplier during this period, accounting for 35 per cent of India’s oil imports, while the US was the fifth-largest supplier. India had increased imports of Russian oil at discounted prices after Western countries imposed sanctions on Russia in 2022 after the war with Ukraine broke out.

In 2024-25, the overall trade between India and Russia stood at USD 68.7 billion, which was almost six times more than the pre-pandemic times. India exported goods worth USD 4.88 billion, mainly agro products, chemicals, pharmaceuticals, iron and steel, whereas imports from Russia amounted to USD 63.84 billion that included oil and petroleum products, fertilisers and machinery.

Both nations aim for a bilateral trade of USD 100 billion by 2030. Russia is also the major supplier of military equipment to India, with Russian tanks and armoured vehicles, warships, air defence systems, fighter aircraft, helicopters and transport aircraft forming a large chunk of India’s inventory.

Sectors that are affected

On the other hand, India’s exports to the US in 2024 was USD 87.4 billion, whereas imports from the US were USD 41.8 billion, a trade balance tilted in India’s favour that has been irking the US President.

In FY 2024-25, India-US bilateral trade was USD 131.8 billion. The US is India’s biggest trading partner whereas India ranks 10th among US’ goods trading partners. China tops the list of US trading partners. India’s exports to the US account for 18 per cent of its total exports by value, the highest among all countries.

The Indian export sectors that are likely to face major impact include textiles and clothing, gems and jewellery, shrimp, leather items and footwear, chemicals and electrical and mechanical machinery.

Indian goods that are exempt from the 50 per cent tariffs include pharmaceuticals, crude oil, natural gas, refined fuels, coal, electricity, critical minerals, computers, smartphones, tablets, flat-panel displays, integrated circuits, SSDs and semiconductors.

Available Ministry of Commerce data top Indian export sectors in 2024 were electronics, accounting for 14.30 per cent of the exports, followed by gems and jewellery at 12.80 per cent, pharmaceuticals at 10.40, machinery and nuclear reactors at 8 per cent and refined petroleum products at 7.5 per cent.

India exported 7,346 commodities to the US in 2024. India supplies 40 per cent of the US’s generic drugs, 90 per cent of its premium Basmati rice and is among the top suppliers of smartphones. India’s overall export sector forms just 22 per cent of its GDP, the rest being made up of the domestic market.

How have other countries been tariffed

Tariffs are taxes charged by the government on goods bought from other countries and payable by the importer. Generally, they are a percentage of a product’s value. Tariffs are meant to raise the price of imported goods to discourage their consumption. Importers may pass some or all of the extra cost on to customers and may reduce the quantum of imports.

The imposition of tariffs varies widely from country to country, depending on several economic, political and diplomatic factors like domestic production of goods or relations with other countries. A country may levy different rates for different countries for similar products or services.

After India and Brazil, Syria faces the highest tariff at 41 per cent followed by Laos and Myanmar with 40 per cent. Switzerland is next with 39 per cent followed by Canada, Serbia and Iraq with 35 per cent. Algeria, Bosnia, China, Libya and South Africa have been tariffed at 30 per cent. Brunei, Kazakhstan, Mexico, Moldova and Tunisia face a ley of 25 per cent, with the remaining countries being below this. The United Kingdom is at the lowest at 10 per cent.

Countries in India’s neighbourhood are better placed. A tariff of 30 per cent has been placed on China, the largest importer of Russian oil as well as a strong supporter of Russia. Bangladesh and Sri Lanka are at 20 per cent, Pakistan at 19 per cent and Afghanistan at 15 per cent. Nepal, Bhutan and Maldives do not figure in the list.

India’s firm but measured response

On Friday, Prime Minister Narendra Modi is to chair a crucial high-level Cabinet meeting to assess the impact of the steep tariff hike recently imposed by the US on Indian exports. Earlier, he said at a public event that he would not compromise India’s interests, especially on opening up the farm and dairy market.

Taking a firm stand, India has termed the tariffs as “unfair, unjustified and unreasonable”, and said that it will take all actions necessary to protect its national interests. “We have already made clear our position on these issues, including the fact that our imports are based on market factors and done with the overall objective of ensuring the energy security of 1.4 billion people of India,” the Ministry of External Affairs said.

“It is therefore extremely unfortunate that the US should choose to impose additional tariffs on India for actions that several other countries are also taking in their own national interest,” the ministry added.

India has also pointed out the US and the European Union continued imports of Russian oil even after the Russia-Ukraine War commenced in 2022. Even Turkey, a US ally and NATO member, has been importing oil from Russia.

The US engaged in a trade war over tariffs with China, with both countries imposing hefty levies in a tit-for-tat game, and China also restricting the exports of critical rare earth minerals. India’s approach, in contrast, has been more measured even when compared to Brazil’s stance.

The trade talks between India and the US over working out a trade deal have collapsed after several rounds. Meanwhile, India’s National Security Advisor Ajit Doval is on a visit to Russia to further bilateral cooperation, where he also met the Russian President, Vladimir Putin, and Prime Minister Modi is planning a visit to China to attend the Shanghai Cooperation Organisation meet from August 31 to September 1.