Trump Administration's Fifty Percent Tariffs Take Effect in India

What Happened?

U.S. tariffs on India were at 25%, but the Trump Administration added another 25% to punish India for its purchases of Russian oil and weapons systems. Now the combined 50% tariffs on India have taken effect. The new rates make tariffs in India among the highest in the world.

In response Prime Minister Modi has been on a whirlwind speaking tour encouraging small business owners and entrepreneurs to put up signs saying ‘Made in India’ in their shops. Mr. Modi recently told a crowd in Delhi, ‘Economic selfishness is on the rise globally and we mustn't sit and cry about our difficulties, we must rise above and not allow others to hold us in their clutches.’

Why it Matters

India is a key strategic partner for the United States in the Indo-Pacific region. The U.S. and India have long enjoyed good relations due to several factors. Both countries are democracies, have large multi-cultural populations, and share a concern about the growing power of China. To counter China’s growing influence, the U.S. and India are currently holding talks to establish a new ten-year framework for a new defense agreement.

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But the high tariffs imposed by the Trump Administration has already become a stumbling point for U.S.- India relations. Though Prime Minister Modi has not mentioned President Trump directly in his recent speeches, when he said, ‘we must not allow others to hold us in their clutches,’ that is a clear but indirect reference to the United States and the tariffs imposed by the Trump Administration.

India needs a cooperative defense framework with the United States to help counter China, so it is likely the tariffs will result in some indirect criticism by senior leaders in India’s government, but probably not much else. Prime Minister Modi must balance the needs of a growing economy with the potential threats posed by India’s neighbors, which includes China and Pakistan. 

The old adage about central Asia is true, India lives in a rough neighborhood. With Pakistan to its west and China to the east, India has potential enemies on both sides of its borders. That geographic reality is likely to continue driving increased defense ties between the U.S. and India because India lacks the capacity to build weapons systems on the scale of the U.S. or Russian defense industries.

How it Affects You

India is now the world’s most populous country, with large numbers of people struggling to make ends meet in day-to-day life due to limited economic opportunities.

Those conditions could generate a backlash of anti-U.S. sentiment due to the high tariff rates. The U.S. tariffs could also stimulate a stronger ‘make in India, buy in India’ movement similar to the ‘Made in the U.S.A.’ concept often cited in the United States. 

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