The Trump administration has announced it will double the tariff rate on Indian imports to 50% starting on the 27th. This punitive action is a response to India’s increased importation of crude oil from Russia, despite ongoing Western sanctions on Russia due to the situation in Ukraine. The U.S. is applying pressure to Russia through these tariffs, hoping to drive negotiations forward.
Previously, President Trump had warned of imposing a secondary tariff of 100% on countries that continued to purchase Russian oil after the Ukraine conflict began. The U.S. Secretary of the Treasury, Scott Besant, also noted that the purchase of Russian oil by India’s wealthy elite had resulted in profits, leading to further tariff threats if the situation did not improve.
Despite multiple negotiations, the U.S. and India have been unable to reach an agreement on reducing tariffs on American agricultural products or halting India’s purchase of Russian oil. Consequently, Trump announced a hefty tariff hike on Indian goods to 50% starting the 27th.
In response, Indian Prime Minister Narendra Modi’s administration is undertaking the largest tax overhaul in eight years to bolster domestic support. This involves a revamp of the Goods and Services Tax (GST) system, simplifying its complex structure and reducing tax rates on numerous consumer goods. The GST reform is expected to decrease India’s revenue from its significant tax source but could boost the GDP by 0.6% over the next year. However, this will come with an estimated annual fiscal cost of 20 billion dollars to the Indian government.