The BGA India team, led by Managing Director Anuj Gupta, wrote an update to clients on the additional 25 percent U.S. tariffs President Donald Trump levied on India.

Context

  • Citing India’s Russian oil imports, U.S. President Donald Trump issued an executive order August 6 that imposes an additional 25 percent tariff on Indian exports to the United States, raising the total to 50 percent. The additional tariff will take effect 21 days after the date of this executive order (on August 27) with exceptions for goods already in transit but that do not enter the United States before August 27 and goods that have entered the United States for consumption and are removed from warehouses before September 17.
  • India’s Ministry of External Affairs has described the move as “deeply regrettable, unfair, unjustified and unreasonable.” It noted that the energy imports are “governed by market dynamics” and are purchased with the overarching goal of ensuring the energy security. In response to Trump’s earlier statement that he would be raising the tariff on India “very substantially,” the ministry remarked that the previous U.S. administration, under President Joe Biden, had “encouraged Russian energy imports by India for strengthening global energy markets’ stability.”

Significance

  • The development comes at a time when the two sides are also negotiating a bilateral trade agreement (BTA), which has been delayed despite optimism expressed by negotiators on both the sides. These moves only further complicate BTA negotiations, with India stating it will take necessary measures to safeguard its national interests and economic security.
  • The latest measures could also have some potential strategic dimensions because they come at a time when Prime Minister Narendra Modi is scheduled to visit Japan August 30. The trip will be followed by a two-day visit to China for the Shanghai Cooperation Organization summit, marking Modi’s first trip to Beijing since border clashes with China in 2020.
  • Some within India’s strategic community have also highlighted the inconsistency that while India faces additional tariffs, Trump has avoided imposing similar tariffs on China and other countries that continue to buy Russian oil. They have argued that India needs to find levers to negotiate with Trump instead of giving in to the demands. A U.S. trade team is now expected to visit India from August 25 for the next round of BTA negotiations.

Implications

  • The incremental tariffs will accelerate India’s approach to diversify its trade and exports to alternative blocs,includingthe Association of Southeast Asian Nations, Africa and South America. In parallel, Indian negotiators will aim to advance India’s free trade agreements that are in place with Australia and the United Arab Emirates, kick-start the implementation of free trade agreements with the United Kingdom and European Free Trade Association and conclude early deals with the European Union and other partner countries.
  • As negotiations with the United States continue, the government is proactively preparing for potential impacts on Indian exporters, particularly in response to the proposed U.S. tariff increases. Minister of Commerce and Industry Piyush Goyal has held various consultations with key industry associations in sectors such as agriculture, food-processing, engineering goods, steel and textiles, to assess the sectoral implications of prospective changes in the tariff structure. The government is also considering a $2.4 billion package to shield and support exporters from the tariff impact. The scheme will likely be announced in August and implemented in September.

If you have questions or comments, please contact BGA India Managing Director Anuj Gupta at agupta@bowergroupasia.com.

Best regards,

BGA India Team

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Managing Director

Anuj is a distinguished policy leader and strategist who has played a catalytic role across India’s government and private sector, guiding stakeholders through the country’s complex and evolving policy and investment landscape. As BGA’s India practice leader, he helps clients leverage the country’s rapid economic growth to advance their goals and strategies.  Anuj previously led public policy efforts for the Tata Group, India’s largest business conglomerate, where he advised more than 30 group companies on policy affairs strategy. His interventions directly influenced high-stakes outcomes across diverse sectors, including technology, finance and manufacturing.   Anuj spent a decade in the Indian and Abu Dhabi governments, where he ... Read More