With a 50% tariff on Indian goods now in effect, the Indian government has acknowledged the potential damage and is urgently pursuing a strategy to diversify its exports. This move is seen by Indian analysts as the first countermeasure against the high tariffs imposed by the Trump administration.
The Indian government is planning to reach out to 40 markets, including the UK, Japan, and South Korea, to expedite this process as a matter of urgency. The new tariffs, which came into effect on August 27, 2025, are a result of the Trump administration's decision to add an additional 25% tariff on top of an existing 25% duty, citing India's continued purchase of Russian crude oil.
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| Credit: Reuters |
Signs suggest that the stand-off is not going to end anytime soon. Unconfirmed media reports from German and Japanese newspapers claim that Prime Minister Modi has refused to answer President Trump's personal calls four times, though Indian officials suggest this is part of a deliberate strategy to avoid President Trump misrepresenting a deal.
Meanwhile, President Trump has repeatedly claimed that he was responsible for de-escalating a potential nuclear conflict between India and Pakistan, an assertion that New Delhi has consistently denied. The US leader has also made unsubstantiated claims about the conflict, stating that seven fighter jets, costing around $150 million, were shot down; in the past, he kept the figure at 5. He has linked this claim to his success in averting an "unwinnable war" through the use of trade threats.
Much to the irritation of the Indian government, President Trump has also been seen to be "cosying up" to the Pakistani military. Some military analysts have attributed this change of tone in Washington to an inevitable necessity on the military front, as Pakistan shares a porous border with Iran, an arch-foe of the US in the region.
As for the tariff war, India has admitted it will be a severe blow to economic growth, with Prime Minister Modi publicly stating that the country would be forced to pay a heavy price. Finding alternative markets is neither easy nor fast, particularly for small and medium-sized enterprises that are heavily reliant on the US market. Labour-intensive sectors like textiles, gems and jewellery, and leather goods are expected to be hit the hardest.
India, meanwhile, has completely ruled out turning its back on oil imports from Russia, citing a long-standing relationship and the ability to purchase crude oil at a heavily-discounted rate. This arrangement is mutually beneficial, with Russia earning much-needed revenue and India powering its growth with cheap oil. The Trump administration accused India of selling refined oil, bought from Russia at discounted rates, to other oil importers, including those from Europe; the former wants to buy the commodity from them, ignoring the heavy cost of importing crude oil over vast distances.
The Trump administration seems to have ignored how the status quo helps keeping the oil prices low': the fact that China and India, world's two biggest oil importers, addressing their respective needs while importing from Russia has actually helped keep the oil prices low, as there is plenty of supply in the markets at present; on the other hand, the OPEC+ was compelled to restore the output fast in fear of losing the market share. After all, President Trump came into office while vowing to keep energy prices low in order to tame the inflation - a key campaign promise.
With neither side showing signs of flexibility, the tension is not expected to subside. There is also fear in the Indian camp that the tariffs could be extended to the vast digital services sector that India provides, which would raise the stakes even higher for both countries.
