The punitive tariffs imposed by the United States on India have come into effect, and India has taken multiple measures to cope with the impact
The 25% punitive tariff imposed by the US government on Indian goods imported to the US, citing Indian imports of Russian oil, officially came into effect on the 27th. So far, the cumulative tariff rate imposed by the United States on Indian products has reached 50%.
Tariffs impact exports
Or there may be large-scale unemployment
The US government announced on July 31st a 25% tariff on goods imported from India, which came into effect on August 7th. On August 6th, US President Trump signed an executive order imposing an additional 25% tariff on Indian exports to the US, citing India's "direct or indirect import of Russian oil" as the reason.
Kaitou International Macroeconomic Consulting stated that the tariffs imposed by the United States on India will result in a 0.8 percentage point decline in India's economic growth rate this year and next year, respectively.
The Indian government estimates that US tariffs will impact Indian exports worth $48.2 billion. According to data from the US Department of Commerce, in 2024, the trade volume of goods between the US and India is approximately $128.8 billion, with India's trade surplus with the US reaching $45.8 billion.
Ajay Srivastava, founder of the New Delhi based think tank Global Trade Research Initiative and former Indian trade official, said that this "strategic shock" could lead to massive unemployment in India's major export regions, reducing the country's participation in the global value chain.
The Indian government promises
Provide financial assistance
Pankaj Chada, Chairman of the Indian Engineering Export Promotion Council, said, "US customers have stopped placing new orders, and due to these additional tariffs, the export volume of (Indian related products) may decrease by 20% to 30%
Chada stated that in response to the impact of tariffs, the Indian government has promised to provide financial assistance to businesses when they suffer economic losses, including increasing subsidies for bank loans and supporting industrial diversification. In addition, India will promote exports to nearly 50 countries and regions, particularly in the areas of textiles, food processing products, leather goods, and seafood.
According to Indian media reports, the Indian government is seeking free trade agreements with some major economies to promote exports and diversify export markets.
Sanjay Malhotra, Governor of the Reserve Bank of India (RBI), stated that the RBI is prepared to protect the Indian economy from the impact of high US tariffs.
Radhika Rao, Senior Economist at DBS Bank in Singapore, stated that the emerging risks of a downturn in India's economic growth may prompt the Reserve Bank of India to take action to increase credit and liquidity.
Since the US government announced punitive tariffs on India, Indian Prime Minister Modi has repeatedly stated in public speeches that he will defend his country's interests. Modi emphasized in his speech in Ahmedabad, Gujarat on the 25th that the Indian government will never let small and micro business owners, farmers, and livestock farmers be harmed. No matter how much pressure we face, we will continuously enhance our capabilities to cope with it
Modi previously stated that the government will accelerate the adjustment of the Goods and Services Tax to boost economic confidence and better cope with tariff shocks.
A new round of bilateral trade agreement between India and the United States
Negotiations postponed
Due to the cancellation of the US trade delegation's trip to India, the new round of bilateral trade agreement negotiations between India and the US, originally scheduled for August 25-29, has been postponed. Previously, the two sides had held five rounds of negotiations but had not reached an agreement.
In an interview with Fox Business News in mid month, US Treasury Secretary Benson said that trade agreements between the United States and multiple trading partners such as India and Switzerland are still pending and he hopes to complete trade negotiations by the end of October.
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