Delhi’s dilemma: With 50pc US trade tariff looming, what can India do?

Nevin Al Sukari - Sana'a - NEW DELHI, Aug 7 — India is likely to be among the countries worst hit by US President Donald Trump’s trade offensive, with tariffs on Indian imports set to surge to 50 per cent if a deal is not struck in three weeks.

Below are various options for India to deal with the crisis.

Negotiate further 

India was expected to be among the first countries to sign a trade deal with Trump’s team, but talks fell through after five rounds of negotiations over disagreements on opening India’s vast farm and dairy sectors and stopping Russian oil purchases.

New Delhi has reacted strongly to the 50 per cent tariff on US imports from India, which could virtually stall trade. Still, Indian officials are hopeful that closed-door talks will address some differences. 

A US trade team is expected to visit the Indian capital later this month. But Prime Minister Narendra Modi said on Thursday, without referring to the tariffs, that he was ready to “pay a heavy price” for not compromising on the well-being of the country’s farmers, dairy sector and fishermen.

Indian officials, however, have said they are open to cutting tariffs for some US farm and dairy goods like almond and cheese.

Cut Russian oil imports

India, the world’s third-biggest oil importer and consumer, previously said it was confident of meeting its oil needs from alternative sources if imports from Russia become impractical due to sanctions or other reasons. It bought little Russian oil before the Ukraine war that began in 2022, but now gets more than a third of its oil imports from its old trade and defence partner.

Reuters reported late last month that Indian state refiners such as Indian Oil, Hindustan Petroleum, Bharat Petroleum and Mangalore Refinery Petrochemical had stopped buying Russian oil as discounts narrowed and pressure from Trump mounted. Officials have, however, warned of spikes in global prices without Russian oil in the market.

Besides Russia, other big suppliers to India are Iraq, Saudi Arabia and the United Arab Emirates under annual deals with the flexibility to request more supply every month.

In total, India buys from about 40 countries, including the United States.

Band together with fellow developing countries

Along with India, the other big target of Trump’s tariffs is Brazil. The two countries are founding members of the BRICS bloc that also includes China, Russia and South Africa. Brazilian President Luiz Inácio Lula da Silva, who holds the presidency of BRICS, told Reuters that he would call Modi on Thursday and China’s Xi Jinping and other leaders afterwards to discuss the bloc’s response to the tariffs.

One Indian government source said India needs to gradually repair ties with the US while engaging more with other nations that have faced the brunt of Trump’s tariffs and aid cuts, including the African Union and BRICS.

India is already making some forays with Russia and China.

Ahead of Russian President Vladimir Putin’s expected visit to New Delhi this year, India’s national security adviser is in Moscow and the foreign minister is due to follow. On Tuesday, Russia said the two countries discussed further strengthening defence cooperation “in the form of a particularly privileged strategic partnership”.

India has also boosted engagement with China, a change after years of tensions following a deadly border clash in 2020. Modi is set to visit China in weeks for the first time since 2018 for the summit of a regional security conference, which could see the coming together of Modi, Putin and China’s Xi Jinping.

The Indian defence and foreign ministers visited China recently.

What are the consequences for India if talks fail?

India exported goods of around US$87 billion in the fiscal year ended March 2025 to the US, including garments, pharmaceuticals, gems and jewellery, and petrochemicals. They account for about 2 per cent of India’s GDP.

If the proposed 50 per cent duty on Indian goods is enforced, pharmaceutical exports – subject to a different duty structure – may be the only products still shipped from India to the US.

And it’s not just trade that will be in the firing line. Analysts expect tensions to spill over to areas like work visas for tech professionals and the offshoring of services. India has long been a major beneficiary of US visa programmes and the outsourcing of software and business services, a sore point for Americans who have lost jobs to cheaper workers in India. — Reuters