Why in news?
In late July 2025 the United States announced an additional 25 per cent duty on a wide range of Indian imports, doubling overall tariff rates on some items to as high as 50 per cent. The action was linked to New Delhi’s purchase of Russian oil and defence equipment and revived long‑standing disagreements over market access and strategic autonomy. India’s Ministry of External Affairs insisted that the broader strategic partnership between the two democracies would endure despite these trade frictions.
Background and history
India and the United States describe their relationship as a comprehensive global strategic partnership grounded in democratic values and cooperation in defence, trade and technology. Over the past decade bilateral trade has grown steadily, reaching around USD 186 billion in 2024‑25 with India running a sizeable goods surplus. However, differences over India’s continued defence and energy ties with Russia, its participation in groupings such as BRICS, and its desire for strategic autonomy have periodically surfaced. Washington has previously criticised India’s relatively high average tariff rates and non‑tariff barriers while New Delhi has complained of U.S. duties on steel, aluminium and agricultural products.
Structural fault‑lines in bilateral ties
- Diverging approaches to Russia: India continues to import Russian crude and S‑400 air‑defence systems, reflecting its long‑standing ties and its doctrine of strategic autonomy. The United States, citing the ongoing conflict in Ukraine, has imposed secondary sanctions and linked the new tariffs to these purchases.
- Market‑access disputes: Washington argues that India’s average tariffs of around 17 per cent and various regulatory hurdles restrict U.S. companies, while India points to steep U.S. duties on textiles, leather, gems and agricultural products that now range from 30–50 per cent.
- BRICS and Global South activism: Former president Donald Trump characterised the BRICS grouping as anti‑U.S. and criticised India’s participation, whereas India views BRICS membership and initiatives such as the India–Middle East–Europe Economic Corridor as complementary to its engagement with the Quadrilateral Security Dialogue.
- Pakistan policy: Renewed U.S. engagement with Pakistan, framed as counter‑terror cooperation, unsettles New Delhi, which has sought to isolate Islamabad over cross‑border terrorism.
- Competing nationalisms: India’s assertive diplomacy and its slogan Sabka Saath Sabka Vikas abroad are sometimes perceived in Washington as evidence of nuclear assertiveness and non‑alignment, leading to scepticism among U.S. policy‑makers.
Economic impact of the tariffs
- Reduced competitiveness: Higher duties on textiles, telecom equipment, gems and farm produce make Indian goods costlier in the U.S. market, eroding the price advantage enjoyed over suppliers such as Vietnam or Bangladesh.
- Strain on labour‑intensive sectors: Micro‑, small‑ and medium‑sized enterprises in garments, footwear and handicrafts risk falling demand and shrinking profit margins, potentially affecting employment.
- Disruption to global value chains: Increased duties may discourage multinational companies from sourcing from India or investing in export‑oriented units, thereby weakening India’s position in U.S.‑led supply chains.
- Narrowing trade surplus and investor caution: India’s goods trade surplus with the United States could decline, and uncertainty may dampen foreign direct investment in export‑oriented industries, challenging the “Make in India” agenda.
Strategic implications
- From partnership to transactionalism: The decision to link tariffs with foreign‑policy choices signals a more transactional approach by Washington that prioritises immediate U.S. interests over long‑term strategic cooperation.
- Pressure on India’s multipolar strategy: India’s balancing act between BRICS, Russia, Iran and the West may come under closer scrutiny, complicating its efforts to maintain autonomy in foreign policy.
- Trust deficit: The harsh rhetoric resurrects Cold‑War‑era suspicions, making it harder to build consensus on emerging areas such as technology transfer and educational exchanges.
- Energy sovereignty concerns: Linking trade to energy imports undermines India’s attempts to diversify its energy basket and could impede its access to discounted Russian oil.
Way forward
India–U.S. relations have weathered many disagreements and will likely remain important to both countries. To preserve the strategic partnership, the two sides need frank dialogue on tariffs, clearer timelines for phasing down duties, and respect for each other’s geopolitical compulsions. Building resilient supply chains, cooperating in emerging technologies and continuing people‑to‑people ties can help insulate the relationship from short‑term trade disputes.