US-India Relations Plummet as Trump Imposes 50 Percent Tariff

Industry Insights from Next Move Strategy Consulting

In a significant blow to US-India relations, the United States has imposed a 50 percent tariff on India, the highest globally, marking the lowest point in bilateral ties in years. The move, driven by US President Donald Trump’s focus on onshoring rather than friend-shoring, has stunned experts and strained the once-warm relationship between Trump and Indian Prime Minister Narendra Modi.

A Surprising Tariff Hike

On Wednesday, the US announced an additional 25 percent tariff on India due to its imports of Russian oil, bringing the total to 50 percent, a rate matched only by Brazil. The decision, set to take effect in three weeks, follows a breakdown in trade negotiations, despite India’s early efforts to engage with Washington.

The breakdown in trade negotiations came unexpectedly, with experts citing a sharp escalation in tensions that caught many observers off guard. “This is a very difficult moment, arguably the worst in many years in their relationship.”

Key Developments at a Glance:

Highest Global Tariff: India faces a 50 percent tariff, the steepest among all countries.
Russian Oil Dispute: The additional 25 percent tariff targets India’s imports of Russian oil.
Failed Trade Talks: Trade negotiations between the US and India ultimately collapsed, though the specific terms of India’s offers or objections have not been made public.
Geopolitical Tensions: Broader geopolitical disagreements have contributed to the strain in relations, although no specific incidents have been officially cited in the tariff decision.
India’s Response: New Delhi called the tariff “unfair, unjustified, and unreasonable,” defending its Russian oil imports as essential for its 1.4 billion people.

Economic and Geopolitical Fallout

Last year, US-India bilateral trade reached $212 billion, with a $46 billion trade surplus in India’s favor. Modi has aimed to more than double this to $500 billion in five years. However, the new tariffs threaten India’s ambitions to position itself as a manufacturing hub, particularly for multinational firms like Apple, which have expanded their assembly operations in India in recent years as part of global supply chain diversification.“Analysts suggest that a 50 percent tariff could discourage international businesses from viewing India as a stable or cost-effective production base, especially amid broader global uncertainties."

Geopolitically, the tariffs complicate India’s balancing act between maintaining ties with Russia, its longstanding defense and trade partner, and strengthening relations with the US. Farwa Aamer, director of South Asia Initiatives at the Asia Society Policy Institute, noted, “This will test India’s foreign policy.” India’s global standing and Modi’s personal stature drive its resolve to maintain national security priorities, she added.

Navigating a Path Forward

India is now pivoting to strengthen other trade relationships, including a recent agreement with the United Kingdom and ongoing talks with the European Union. Modi’s expected participation at the upcoming Shanghai Cooperation Organisation (SCO) summit indicates a broader strategy to maintain dialogue with regional powers, including China. Meanwhile, Experts believe that navigating this diplomatic low point will require careful engagement and renewed efforts from both sides to stabilize the relationship.

A Test for Global Ambitions

As India navigates this trade and diplomatic setback, the 50 percent tariff underscores Trump’s shift toward onshoring, sidelining even close partners like India. The move not only disrupts economic ties but also challenges India’s aspirations as a global manufacturing and geopolitical player. As tensions rise, both nations may need to recalibrate their diplomatic and economic strategies to restore momentum in a shifting global landscape.

Source: https://www.aljazeera.com/news/2025/8/7/us-india-relations-at-their-worst-as-trump-slaps-50-percent-tariff

Prepared by: Next Move Strategy Consulting