Punitive 50% tariff dampens US-India relations

President Donald Trump’s 50% tariff on Indian goods took effect Wednesday, escalating a trade dispute that has damaged relations between Washington and New Delhi over India’s Russian oil purchases.

State of play: The latest action imposes an additional 25% duty on top of July’s initial 25% tariff. The levies now cover more than 55% of India’s $87.4 billion in annual U.S. exports, with textile and jewelry sectors facing a projected 70% shipment decline as American buyers turn to competitors in Bangladesh and Vietnam. India’s pharmaceutical sector, which generates $8.7 billion in U.S. sales and supplies roughly half of America’s generic drugs, received an exemption from the higher tariffs.

Some economists believe the duties could cost up to 2 million Indian jobs while cutting U.S.-bound exports by $37 billion this fiscal year.

Why this matters: The escalation follows the collapse of bilateral trade talks after five negotiating rounds failed to reach an agreement. U.S. trade officials indefinitely postponed a planned late-August visit to India, highlighting the deteriorating economic relationship.

Tensions escalated when White House adviser Peter Navarro called the Ukraine conflict “Modi’s war” in an interview with Bloomberg. “I mean Modi’s war, because the road to peace runs, in part, through New Delhi,” he said, adding that Indians “are so arrogant about this.” Indian officials, on the other hand, rejected American pressure tactics, with junior foreign minister Kirti Vardhan Singh saying, “Our concern is our energy security, and we will continue to purchase energy sources from whichever country benefits us.”

Strategic realignment: India, which has urged self-reliance, appears to be pivoting toward alternative partnerships. Prime Minister Narendra Modi plans to visit China next week for the first time in seven years, while Russian oil imports have surged from less than 2% of India’s energy needs before the Ukraine conflict to 35-40%.

Despite the tensions, some U.S. officials maintain hope for reconciliation. Treasury Secretary Scott Bessent expressed confidence that bilateral cooperation will ultimately resume, telling Fox Business, “I think at the end of the day we will come together.”