WASHINGTON/NEW DELHI, Aug 6: In a dramatic escalation of trade tensions, US
President Donald Trump signed an executive order on Wednesday imposing an additional
25% penalty tariff on Indian goods, citing India’s continued import of Russian
crude oil as a violation of US foreign policy interests.
The move doubles the total tariff burden on Indian exports to 50%, making it
the highest US tariff rate imposed on any country globally.
The executive order, issued under the International Emergency Economic Powers
Act and other statutory authorities, declares that India’s direct or indirect
purchase of Russian oil undermines US efforts to isolate Moscow over its actions
in Ukraine.
“India has not been a good trading partner… I think I’m going to raise (tariffs)
substantially over the next 24 hours because they’re buying Russian oil,” Trump
had told CNBC hours before signing the order.
Order details
The new tariffs will take effect 21 days from the signing date—on August 27,
2025—allowing a brief window for negotiations. Goods already in transit before
the deadline will be exempt if they arrive before September 17.
The order builds on Executive Order 14066, which previously banned imports
of Russian-origin petroleum products into the US. Trump’s latest action expands
the scope by targeting countries that continue to engage in energy trade with
Russia, citing national security concerns.
India’s response
New Delhi reacted sharply, calling the move “unfair, unjustified and unreasonable.”
In a statement, the Indian Government emphasized its “transparent and market-driven
approach” to securing energy for its 1.4 billion citizens. “We will take all
necessary measures to safeguard our national interests and economic security,”
a spokesperson said.
Opposition leaders also weighed in. Congress party leader Rahul Gandhi labeled
the tariff “economic blackmail,” accusing Trump of trying to bully India into
an unfavorable trade deal. He urged Prime Minister Narendra Modi not to let
“weakness override the interests of the Indian people”.
The impact
The tariff hike is expected to disrupt trade flows significantly. Indian exporters,
already wary of US tariff volatility, now face the highest duties among major
trading partners—surpassing China’s 30% and Pakistan’s 19%. While about half
of India’s $80 billion in exports to the US fall under exemptions (including
pharmaceuticals and electronics), sectors like textiles, auto parts, and agricultural
goods are likely to be hit hard.
Geopolitical undercurrents
The timing of the order coincides with reports that Prime Minister Modi may
visit China later this month, marking his first trip there in over seven years.
Analysts suggest the tariff move could further strain US-India relations, which
are already facing their most serious crisis in years following stalled trade
negotiations.
As Washington ramps up pressure on countries maintaining ties with Moscow,
India finds itself at the centre of a geopolitical tug-of-war—balancing energy
security, strategic autonomy, and its critical trade relationship with the United
States
Negotiations and sectoral impact
While the tariff order is set to take effect on August 27, officials in both
Washington and New Delhi have signaled that backchannel negotiations are ongoing.
Indian trade representatives are reportedly pushing for exemptions or phased
implementation, especially for sectors already burdened by existing duties.
For instance, Indian shrimp exports—which contribute nearly 48% of their volume
to the US market—already face a 2.49% anti-dumping duty and a 5.77% countervailing
duty. With the new 25% and earlier 25% tariff, the total duty burden on shrimp
will rise to 58.26%.
Other sectors facing steep cumulative duties include textiles and apparel (up
to 63.9%), gems and jewellery (52.1%), and machinery (51.3%).
Industry experts warn that the effective 50% tariff could slash US-bound exports
by 40–50%, with MSME-led sectors particularly vulnerable to order cancellations
and margin collapse
The sectors, which will be impacted by the duty hike include textiles/ clothing
($10.3 billion), gems and jewellery ($12 billion), shrimp ($2.24 billion), leather
and footwear ($1.18 billion), chemicals ($2.34 billion) and electrical and mechanical
machinery ($9 billion), according to Financial Express data.
Indian exporters will not be able to compete with other countries with the
additional levy of 25%. Export orders are already being put on hold.
The existing anti-dumping duty and countervailing duty will also continue,
it is said.
However, finalisation of India-US bilateral trade agreement is expected to ease
the situation.