 "US President Donald Trump has ruled out the possibility of trade talks with India amid the ongoing tariff dispute. File image/AP")
United States President Donald Trump is known to drop bombshells and he did it again on Thursday (August 7) when he said that there will be no trade negotiations with India until a dispute over tariffs is resolved.
The announcement comes after the US president signed an executive order imposing an additional 25 per cent tariffs on India for its continued purchase of Russian oil. With this, India now faces a combined levy of 50 per cent — making it among the most heavily taxed US trading partner in Asia and placing it alongside Brazil, another nation facing steep US tariffs amid tense relations.
What does Trump’s latest announcement mean? How did we reach here? And what does this mean for India-US trade ties? We examine and get you the answers.
No trade negotiations, says Trump
On Thursday, Trump speaking from the Oval Office in the White House ruled out the possibility of trade negotiations with India unless the issue of tariffs is resolved.
When asked by a news reporter if he expected trade negotiation to increase with India after the 50 per cent tariffs, Trump shrugged his shoulders and replied, “No, not until we get it resolved.”
The question by the reporter came a day after Trump announced the imposition of a 25 per cent additional tariff on India as punishment for buying Russian crude . The executive order that he signed on the levy read that India is “currently directly or indirectly importing Russian Federation oil,” and says it is “necessary and appropriate” to apply the new 25 per cent tariff on Indian goods.
The new, Russia-related tariffs will take effect in 21 days, while the previously announced 25 per cent tariff took effect on Thursday (August 7).
Trump’s Russian penalty on India didn’t come as a complete shocker — he had been threatening New Delhi with tariffs for the past one week. In fact, he had written on social media, “India is not only buying massive amounts of Russian oil, they are then, for much of the oil purchased, selling it on the open market for big profits. They don’t care how many people in Ukraine are being killed by the Russian war machine.”
India defended its purchase with the Ministry of External Affairs issuing a statement saying “We have already made clear our position on these issues, including the fact that our imports are based on market factors and done with the overall objective of ensuring the energy security of 1.4 billion people of India.”
Moreover, Prime Minister Modi also reacted saying that India wouldn’t capitulate to outside pressure. “For us, the interest of our farmers is our top priority,” he said. “India will never compromise on the interests of farmers, fishermen and dairy farmers. I know we will have to pay a heavy price for it, and I am ready for it. India is ready for it.”
But how did we get here?
Trump’s announcement comes even as India and the US try to stitch together a trade deal that was first agreed upon by Trump and Modi when the latter visited the White House in February.
Following that bilateral talks gained momentum; India’s Commerce Minister Piyush Goyal visited Washington in March and met with Commerce Secretary Howard Lutnick and US Trade Representative Jamisen Greer. Later in March, US officials visited Delhi for talks.
In April, US Vice President JD Vance during his India visit said both sides were making progress on trade talks and it was reported that India and the US finalised the terms of reference for the trade negotiation, bringing them a step closer to an agreement.
The biggest breakthrough came in June when Trump declared that a deal may be close. He was quoted as saying, “We’re having some great deals. We have one coming up, maybe with India, a very big one, where we’re going to open up India.”
However, since then the trade talks have hit a rough patch. On July 4, in what appeared to be a hardening of stance by India, Piyush Goyal said that India would not do trade deals to meet deadlines and national interest will be “supreme”.
His remarks came a little after the two delegations met for a fifth round of talks. However, according to sources, agriculture and dairy products were the two big items that became sticking points between the two nations.
Then last week, Trump ramped up his offensive against India, announcing that he would impose a 25 per cent tariff on India, despite it being a “friend”. He also stated that the US would impose a penalty on India for buying Russian oil.
What comes next though?
India and the US were to hold a sixth round of talks on August 25. But it is now not known if these discussions will take place after Trump’s big bombshell.
Meanwhile, NDTV reports that PM Modi is set to chair a crucial high-level Cabinet meeting today to assess the impact of the steep tariff hike recently imposed by the US on Indian exports.
Moreover, the Indian news website quoting sources reported that major US retailers such as Walmart, Amazon and Target have halted orders from India with exporters receiving letters and emails from US buyers requesting that they pause apparel and textile shipments until further notice.
While it is uncertain what comes next when it comes to trade, most analysts note that this marks a new low in the US-India relations. As Vina Nadjibulla, vice president of strategy and research at the Asia Pacific Foundation of Canada, told Al Jazeera, “This is a very difficult moment, arguably the worst in many, many years in their relationship and puts India in a very small group of countries that find themselves without a deal and with the highest tariff rates. They now need some pragmatic path forward and need to find a way to rebuild trust.”
Even some American leaders such as senior US Congressman Gregory Meeks have said that the US president’s actions endanger ties with the US.
With inputs from agencies