New Delhi, June 12, 2024: The Trump administration’s decision to impose a 25% tariff on $5.6 billion worth of Indian exports—including steel, aluminum, and pharmaceuticals—has sent shockwaves through India’s trade and policy circles. Announced late Tuesday, the move escalates long-standing U.S. concerns over India’s "unfair trade practices," but risks deepening economic pain for both nations. With India threatening retaliatory measures, analysts warn of a trade war that could disrupt global supply chains and weaken a bilateral relationship already strained by geopolitical divergences.
The Tariff Hammer: What’s Affected?
The U.S. Trade Representative (USTR) cited "national security" and India’s "persistent market access barriers" as justification for the tariffs, which target sectors where Indian exports have grown sharply in recent years. Key affected industries:
- Steel and Aluminum: India exported $1.8 billion of these metals to the U.S. in 2023. Tariffs could render them uncompetitive against domestic U.S. producers.
- Pharmaceuticals: Generic drugs, a $1.2 billion export segment, may face higher costs for American consumers.
- Chemicals and Engineering Goods: Small and medium enterprises (SMEs) in Gujarat and Maharashtra could see订单 declines.
India’s Response: From Diplomacy to Retaliation
Prime Minister Narendra Modi’s government has called the tariffs "discriminatory" and hinted at countermeasures targeting U.S. agricultural exports (e.g., almonds, apples) and tech products. Commerce Minister Piyush Goyal stated, "We will defend our interests firmly but responsibly." Behind the scenes, officials are reportedly weighing a WTO complaint and faster trade diversification to the EU and Gulf markets.
Political Fallout: BJP’s Balancing Act
The timing is awkward for the Modi administration, which faces elections in key industrial states like Maharashtra later this year. The opposition Congress has seized the issue, with Rahul Gandhi tweeting: "Failed trade policies have left our farmers and workers vulnerable." Meanwhile, the BJP’s nationalist base applauds the government’s tough stance, but business leaders urge caution. "A trade war helps no one," said Rakesh Mohan, president of the Federation of Indian Export Organizations (FIEO).
Human Impact: Jobs at Risk
In Ludhiana’s steel units and Hyderabad’s pharma hubs, anxiety is mounting. "We operate on thin margins. A 25% tariff could force layoffs," said Kirti Shah, a factory owner in Surat. Farmers, too, fear collateral damage if India restricts U.S. almond imports, a key ingredient in India’s snack industry. "Price hikes will hurt small businesses," warned Mumbai-based retailer Ayesha Khan.
Broader Context: A Relationship Under Strain
The tariffs add to existing friction over India’s Russia ties, H-1B visa restrictions, and IPR disputes. While defense and tech collaborations remain strong, the economic pillar of the partnership is eroding. "This undermines trust at a time when China is the real challenge," remarked former diplomat Nirupama Rao.
What Next?
With Trump campaigning on an "America First" platform and Modi prioritizing "Atmanirbhar Bharat," de-escalation seems unlikely before the U.S. elections. India may accelerate free-trade talks with the UK and EU to offset losses. As the ripple effects unfold, one thing is clear: the world’s two largest democracies are learning that friendship has its price.
—With inputs from industry sources