Tuesday 26 / August / 2025
The US administration has issued a notice to India regarding the implementation of additional tariffs on India with effect from 27th August 2025.
Speaking to The Times of Oman, R. Madhusoodanan, a financial expert based in Muscat, said that the move aimed to penalise India over its crude imports from Russia. This is nothing but a retaliatory measure, as no additional tariff has been imposed on China in yesterday’s notification, though a threat of an additional tariff on them was on paper. In fact, China imports more oil from Russia than India. This was expected as the talk between the two countries scheduled last week was called off.
With the move, the Indian goods have become very costly for the US customers. Obviously, the customers have the option to buy goods that are cheaper when compared to Indian goods. The US buyers are moving to other countries, viz, Mexico, Vietnam, China, Bangladesh etc. This is a worrying factor for Indian manufacturers and exporters. The festive season sales during Christmas and New Year, is at stake. The worst-affected sectors in India include textiles, gem and jewellery, marine products, leather goods, chemicals, machinery parts, carpets, furniture etc.
The Indian government has made it clear that “it would withstand the economic pressure as it continues to strengthen its resilience”. The country will not compromise on the interests of farmers, small-scale industries, and domestic producers. Efforts are being made to mitigate the risks by extending trade relationships with other countries. Affordable credit, infrastructure facilities, tax sops, export incentives, and checks on imports are needed to make the domestic products globally competitive. Reforms in GST are on the anvil to boost domestic consumption. RBI has since reduced the approval time for opening Special Rupee Vostro Accounts (SRVAs) to facilitate cross-border trade and settlements in INR with a view to reducing the dependency on the US dollar.
US not insulated
The US is not fully insulated from the adverse impacts of the higher tariffs imposed on other countries. It is a fact that the exports from US are also affected by the new policies. The US is facing debt, inflation, and growth worries. Various data, viz inflation, employment, and GDP, released show the weakness. The removal of Fed Governor Lisa Cook, increasing pressure on Jerome Powell, the Fed Chair for a rate cut, etc, are indicators. Dollar index (DXY), which tracks the strength of the dollar against a basket of major currencies, has fallen since February this year and is currently below 98 levels.
In short, the relationship with the US is important for India. The US accounts for more than 18 per cent of India’s exports with a trade surplus. Secondly, the US is the largest single source, accounting for approximately 28 per cent of total inward remittances to India. For the US also a cordial trade relationship with India is needed in view of multiple reasons. The new tariffs mark a significant shift in US-India trade relations. Therefore, both countries need to find a way forward to end the uncertainties, Madhusoodanan opined.
