A 360-Degree View of Trump’s Tariff Announcement

US President Donald Trump announced 25 per cent tariffs on Indian exports via a post on Truth Social, Wednesday, 30 July.

Trump's announcement came even as Indian and US teams were working to agree on a trade deal before the deadline of August 1, which Trump imposed on all trade negotiations in early July.

So what did Trump say?

Here is his post, verbatim:

“Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non‑monetary Trade Barriers of any Country. Also, they have always bought a vast majority of their military equipment from Russia, and are Russia’s largest buyer of ENERGY, along with China, at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE — ALL THINGS NOT GOOD!
INDIA WILL THEREFORE BE PAYING A TARIFF OF 25%, PLUS A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST. THANK YOU FOR YOUR ATTENTION TO THIS MATTER. MAGA!”

Thus,

1. Not only does the US president want India to pay a tariff of 25 per cent, . . .

2. He also seeks to penalise India for buying Russian oil

Why did he do so?

This Swarajya piece offers three plausible explanations for Trump's actions:

1. Trump lost patience with the ongoing negotiations with India and India's refusal to budge on critical markets which US wanted free access to.

2. Amid slumping approval ratings and pressure over the Epstein investigations, this announcement allowed Trump to project decisiveness and willingness to take 'tough' decisions.

3. Trump is cross over India not giving him any credit for bringing about a pause on Operation Sindoor, and this is his way of getting back at India. (Given Trump's past record, this is most likely to be the correct explanation).

How did India respond?

The Ministry of Commerce and Industry released a statement Wednesday night via the Press Information Bureau:

"The Government has taken note of a statement by the US President on bilateral trade.  The Government is studying its implications.

"India and the US have been engaged in negotiations on concluding a fair, balanced and mutually beneficial bilateral trade agreement over the last few months. We remain committed to that objective

"The Government attaches the utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, and MSMEs.

"The Government will take all steps necessary to secure our national interest, as has been the case with other trade agreements including the latest Comprehensive Economic and Trade Agreement with the UK."

(The contrast here between a bureaucratic statement released by India and an emotional post by President Trump is too sharp to be ignored).

Multiple reports also suggested that Foreign Minister S Jaishankar met Commerce Minister Piyush Goyal following Trump's announcement of tariffs on India. However, there has been no official confirmation of the meeting. It is Goyal's ministry, the Ministry of Commerce, that has been negotiating for a trade deal with America.

What now?

To begin with, the 25 per cent tariff and the 'penalty' is neither official nor final. Till the time of writing, there was no official document of the US government that imposed the tariffs on India.

Additionally, in a press interaction AFTER his announcement of tariffs on India, Trump himself hinted that negotiations with India were still on: "We are talking to them now. We will see what happens. India was the highest or just about the highest-tariff nation in the world...We will see. We are negotiating with India right now...".

But assuming that the US side does not relent and the tariffs and penalty are eventually imposed, it would hit the Indian economy and some sectors within it. According to wealth management firm, Nuvama, roughly 20 per cent of all of India's good exports is to the US and this account's for around 2.5 per cent of India's GDP. With that exposure, Trump's tariffs will lead to pain.

However, it is not exactly doomsday. Exports can be redirected to alternative markets and a weakening rupee could provide price competitiveness to Indian exports worldwide.

Additionally, if India's competitors in the US export market are also slapped with tariffs, it wipes out or reduces any comparative disadvantage for Indian exporters.

Where exactly are the negotiations stuck?

As per multiple reports, the US trade team was demanding access to Indian agricultural markets, and this was among the main points of contention between the delegations.

Columnist Ashok Malik, who has closely followed the recent decades of India-US relations had this to say on X: "The Indian side negotiated the BTA in good faith and was given political space to offer unprecedented concessions in even sensitive, third-rail areas such as agriculture. USTR officials acknowledged this. Trump, it appears, wanted India to go further, even unrealistically further".

If Malik's post is to be believed, India was willing to offer concessions to the US, EVEN in agriculture, but President Trump wanted India to concede even more, which the latter obviously didn't.

Apart from this, other demands from the US side included, 'reductions in tariffs on medical devices like stents and knee implants, and [concessions in] rules governing cross-border data storage and digital services. These demands have been made by successive US administrations.

'India has consistently resisted, citing domestic interests and sovereignty concerns. It seems Trump was unwilling to wait any longer.'

Here, a school of thought argues that the Indian government sacrificed the interests of the tax-paying manufacturing sector for the sake of the 'freebie-guzzling' farming sector. However, such a comparison is valid only as long as the field of operation is limited to India. Once the choice is between the interests of the US farmer and the Indian farmer, any Indian government would argue for the interests of the Indian farmer themselves.

What has been the fallout in Indian politics?

For one, Trump's post has put the Congress party in a precarious position. Up till yesterday, the Congress was claiming in the Parliament and outside that Trump coerced India to a 'ceasefire' in Operation Sindoor by using the trade deal card. In fact, leader of Opposition in Lok Sabha, Rahul Gandhi, had posted on X on 5 July: "Piyush Goyal can beat his chest all he wants, mark my words, Modi will meekly bow to the Trump tariff deadline."

Now that the deadline is only a day away and Trump has anyway played his cards, the Congress is now alleging that Modi has nothing to show for 'friendship' with Trump.

Where does this leave India-US relations?

Currently, at their lowest in many decades. What was presented over the previous years as an ideological alliance (democracy) is now looking like a cold transactional relationship with minimal trust.

Curiously enough, the US deadline for a trade deal with China before high tariffs kick in is 12 August. And even though the last round of talks between the two governments did not result in a trade deal, the US Treasury Secretary and United States Trade Representative leading the talks have said that a deal to extend the tariff pause was likely.

You’re all caught up—until next time.