Threatening 50 Percent Tariffs, President Trump All But Declares Economic War Against India

President Donald Trump’s declaration of India as having a “dead economy” and his imposition of escalating tariffs – potentially reaching 50 percent – has sent shockwaves through both countries, fundamentally altering what was once considered America’s most promising strategic partnership in Asia.

The dramatic reversal began on July 30 when Trump first described India’s economy as “dead,” followed by the announcement of a 25 percent tariff on Indian goods effective August 1. This week, Trump doubled down by threatening an additional 25 percent tariff on India if it continues purchasing Russian oil, bringing the total potential levy to 50 percent – a rate that would effectively cripple bilateral trade.

Affected Areas

The tariff war strikes at the heart of a $130 billion trade relationship that had been growing steadily for decades. According to the New York Times, India’s top exports to America include pharmaceuticals, auto parts, electrical goods, and gemstones – all sectors now facing severe disruption.

The 25% tariff on Indian exports from Aug. 1 is expected to hurt a spate of sectors — from makers of apparel and generic drugs to jewelry and auto component firms, according to Bloomberg analysis. The electronics and gems and jewelry sectors appear particularly vulnerable, with the U.S. imports nearly $14 billion worth of electronics and over $9 billion worth of gems and jewellery from India annually.

The pharmaceutical industry, where India holds world-beating advantages and sells more than $10 billion annually to the United States, faces perhaps the most devastating blow. Trump announced plans for special tariffs on pharmaceuticals that could eventually reach 250 percent. This threatens American companies like Eli Lilly, which recently invested $3 billion in an Indian factory, and could disrupt supplies of generic drugs that India provides – nearly 40 percent of those bought in the United States.

The semiconductor sector, another key area where both countries had been collaborating to reduce dependence on China, also faces uncertainty. Micron, based in Idaho, has invested $2.5 billion in chip-making facilities in Modi’s home state of Gujarat, taking advantage of Indian government subsidies.

Strategic Partnership in Ruins

The tariffs represent more than a trade dispute – they signal the collapse of a carefully cultivated geopolitical alliance designed to counter China’s growing influence. As noted by the New York Times, both countries had been positioning themselves to use each other to restrain China’s might, with American dollars pouring into India as multinational companies sought to reduce their exposure to China.

Trump’s approach is a jolt. His transactional approach, unpredictability, and now the imposition of tariffs has undermined the trust that underpinned bilateral ties, according to analysis from the Lowy Institute. The think tank warns that his public criticism of India’s foreign policy choices threatens to reinforce perceptions of American unreliability.

India’s Measured Response

Shock, dismay and angst swept across India as businesses, policymakers and citizens digested President Trump’s sharp remarks and a surprise 25% tariff rate, Bloomberg reported. However, India’s official response has been notably restrained.

Trump’s approach is a jolt. His transactional approach, unpredictability, and now the imposition of tariffs has undermined the trust that underpinned bilateral ties, according to analysis from the Lowy Institute.

India is weighing options to placate the White House, including boosting U.S. imports, and has ruled out immediate retaliation, according to sources familiar with the government’s thinking. New Delhi vowed to take “all steps necessary” to secure its national interest, but has avoided the tit-for-tat escalation that has characterized Trump’s trade disputes with other nations.

India’s Foreign Ministry defended the country’s Russian oil purchases, stating it was “extremely unfortunate that the U.S. should choose to impose additional tariffs on India for actions that several other countries are also taking in their own national interest”. The ministry emphasized that India began importing oil from Russia only after “traditional supplies” were disrupted, framing the purchases as necessary for the energy needs of 1.4 billion people.

Public and Media Reaction

Social media flared up with users protesting Trump while Indian government officials and business groups assessed the damage. The reaction reflects broader concerns about India’s economic trajectory and its relationship with its most important strategic partner.

Indian media coverage has been extensive, with outlets analyzing both the immediate economic impact and longer-term strategic implications. Business publications have focused on sector-by-sector analyses, while political commentators have questioned whether India’s foreign policy approach needs recalibration.

The trade war threatens to undo years of investment and planning by both American and Indian companies. Wall Street had been banking on India’s future growth, attracted by its relatively young population and political stability. Stephen Schwarzman, CEO of Blackstone, announced $11 billion in investments in Indian data centers this year to fuel the global artificial intelligence boom.

As one Mumbai-based investment professional told the New York Times, these bets are “about the future of business between India, China and the United States” and bring crucial expertise from one economy to another. The professional, who was not authorized to speak publicly, noted that what once looked like India’s strength now appears to be a vulnerability.

The services sector, worth $65 billion last year and more valuable than the total trade deficit in goods, may prove more resilient. Indians remain prominent in American boardrooms while American-trained Indians occupy corner offices in Mumbai. This people-to-people exchange, built around information technology and professional services, represents an area where China cannot compete with India’s capabilities.

The escalating trade tensions have generated what the New York Times describes as “huge uncertainty” about future business relationships. While some American investors with stakes in India are not yet fleeing, many remember the swift deterioration of China-India economic ties in 2020 following border clashes that killed 24 soldiers.

The parallel is instructive: Trump’s 25% India tariffs could backfire and strengthen China-India ties, according to foreign policy analysts, potentially pushing India back toward China despite their strategic rivalry.

The Trump administration’s approach represents a fundamental shift from viewing India as a strategic partner against China to treating it as another economic competitor. Whether this represents a temporary disruption or a permanent realignment remains to be seen, but the immediate impact is clear: one of America’s most important partnerships in the 21st century hangs in the balance.