Trump’s tariff threat: For India, no deal is better than a bad one

The President of the United States, Donald Trump, issues policy decisions and administrative orders from golf courses, aboard Air Force One, on his social media platform Truth Social, and occasionally from the White House in the form of Executive Orders. For President Trump, “tariff” is the most beautiful word in the dictionary.

Once again, on July 31, 2025, Trump disrupted the global trade order, sending markets into turmoil with a sweeping revision of ad valorem duties on imports from nearly 200 countries. His latest Executive Order was issued just a day before his extended deadline to the world expired on August 1, 2025.

India, along with Brazil, Canada, and Switzerland, has been hit particularly hard. I’ll examine the implications for India shortly.

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First, what do these new tariff orders signify?

Indisputably, they add more confusion to an already uncertain global trade environment. More critically, they represent a sharp departure from over a century of US trade policy.

According to the Budget Lab at Yale University, the new tariffs will lead to an overall effective tariff rate of 18.3 per cent— the highest since 1934. They estimate this will cost the average American household around $2,400 in 2025 alone.

Markets in a Tizzy

The new trade policy, effective August 7, impacts nearly every country and marks a decisive break from decades of free trade. The result? Markets tumbled on both sides of the Atlantic.

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After an early-day sell-off in Asian markets, Europe’s Stoxx 600 fell nearly 2 per cent, the UK’s FTSE 100 declined by 0.8 per cent, and Wall Street closed lower, with the Dow Jones and S&P 500 down over 1 per cent, and the Nasdaq dropping more than 2 per cent.

The market drop was worsened by weaker-than-expected US job data.

Why So Much Uncertainty?

First, the second Executive Order (dated July 31) came just months after the original April 2 order — a one-two punch for global markets. Second, there is no assurance that we’ve seen the worst of Trump’s tariff campaign.

Decoding the New Tariff Regime

The revised tariffs impact nearly every country and signify a hard pivot toward protectionism. Here’s how the new structure breaks down:

10 per cent Tariff: Imposed on countries with whom the US has a trade surplus (ie, countries that import more from the US than they export to it).

15 per cent Tariff: Set as a minimum for about 40 countries where the US runs a trade deficit. For some, this is lower than the April 2 “reciprocal” tariffs; for others, it’s higher.

Above 15 per cent: Over two dozen countries now face tariffs higher than 15 per cent, either due to agreed frameworks or unilateral decisions by Trump — mostly those with large trade deficits with the US.

Trans-shipment Penalty: An additional 40 per cent tariff may be imposed on goods Washington deems as “trans-shipped” through another country — a move primarily targeting Chinese goods.

Winners and Losers

The new tariff framework has created a jarring set of winners and losers.

Losers:

Brazil: Hit hardest with a 50 per cent tariff, including a vague “free speech” penalty.

India: Faces a 25 per cent tariff, plus an unspecified penalty for purchasing Russian energy and military hardware — potentially as high as 200 per cent.

Syria: 41 per cent tariff — second highest after Brazil.

Myanmar and Laos: 40 per cent each.

Switzerland: Slapped with a 39 per cent tariff, the highest for any European nation outside the EU.

Iraq and Serbia: 35 per cent each.

Canada: Tariff raised to 35 per cent, but goods compliant with the United States–Mexico–Canada Agreement (USMCA) are exempt.

South Africa, Algeria, Libya: 30 per cent each — the highest in Africa.

Moldova, Mexico, Brunei, Tunisia, Kazakhstan: All face a 25 per cent tariff — same as India, though India has the added Russia penalty.

Winners:

Bangladesh, Sri Lanka, Taiwan, Vietnam: Each now faces a 20 per cent tariff, down sharply from April’s rates (46 per cent for Vietnam, 44 per cent Sri Lanka, 37 per cent Bangladesh, 31per cent Taiwan).

Cambodia, Indonesia, Malaysia, Pakistan, Philippines, Thailand: Tariffs lowered to 19 per cent, from as high as 49 per cent (Cambodia) and 32 per cent (Indonesia) in April.

This comparison puts India at a clear disadvantage among its Asian peers. Trump had initially imposed tariffs up to 27 per cent on Indian goods in April, later paused. Since then, multiple rounds of trade talks have taken place.

There’s More

Beyond general import tariffs, targeted levies now affect specific industries:

• Steel & Aluminium: 50 per cent (effective June 4)

• Copper: 50 per cent (effective August 1)

• Automobiles & Car Parts: 25 per cent (from April 3 and May 3)

Though not yet implemented, Trump has threatened 200 per cent tariffs on pharmaceuticals and semiconductors, citing national security.

Ninety Deals in Ninety Days?

On April 2 — what Trump dubbed Liberation Day — he introduced his first round of “reciprocal” tariffs. Days later, he paused them, giving trading partners 90 days to negotiate deals with the US.

Trump ambitiously aimed for 90 deals in 90 days. According to Kevin Hassett, Director of the National Economic Council, over 50 countries began talks.

Arm-Twisting, Not Diplomacy

Despite his optimism, Trump has little to show beyond coercive deals:

UK: A deal allowing 100,000 cars to be exported to the US at 10 per cent tariff (down from 25 per cent).

EU: 15 per cent flat tariff — less than the threatened 30 per cent.

Japan: 15 per cent tariff, plus $550 billion investment in US infrastructure and agricultural market access.

Philippines: Reduced from 20 per cent to 19 per cent.

China: Tariff reduced from 145 per cent to 30 per cent; China reciprocated with a cut from 125 per cent to 10 per cent.

South Korea: Tariff set at 15 per cent (down from 25 per cent); Korea pledged $350 billion investment and $100 billion in US energy purchases.

These are not carefully negotiated, mutually beneficial agreements — they are outcomes of arm-twisting.

Trade Deals Aren’t White-Ball Cricket

Trump’s 90-deal ambition was destined to falter.

Trade deals aren’t T20 matches — they’re Test cricket. They require years of diplomacy and legislative buy-in. The global average to finalise a trade deal is 2.5 years. Trump wants them done in days.

India’s Trade Talks – Derailed Again

India has held five rounds of talks with the Trump administration — predating the April 2 tariffs. Trump repeatedly claimed a “great deal” with India was coming.

Then, out of nowhere, he delivered a bouncer.

Despite ongoing talks, he branded India a “tariff king” and an “abuser of trade ties”, imposing a 25 per cent tariff — significantly higher than most Asian peers — plus an unspecified Russia-related penalty.

The most alarming scenario? Trump enforces his earlier threat of a 100 per cent secondary tariff on Russian energy buyers. This would make Indian goods prohibitively expensive in the US.

The Logic? There Often Isn’t One

Trump’s justification? High Indian tariffs, non-monetary barriers, and India’s defense trade with Russia.

Here’s what he posted on Truth Social on July 30:

“Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high… Also, they have always bought a vast majority of their military equipment from Russia… INDIA WILL THEREFORE BE PAYING A TARIFF OF 25% PLUS A PENALTY… STARTING ON AUGUST FIRST. THANK YOU… MAGA!”

The next day, Trump doubled down:

“I don’t care what India does with Russia. They can take their dead economies down together, for all I care…”

Consequences of No Deal

In just three days, Trump reversed course — from promising a “great deal” to dismissing India’s economy altogether.

The 25 per cent tariff took effect on August 1. A last-minute mini deal India and the US had been negotiating since February has now collapsed. A comprehensive trade deal looks even more unlikely.

Time for Bharat First

If the new tariffs and the Russia penalty persist, India’s GDP could take a 0.2-0.4 per cent hit, especially affecting export sectors like marine products, textiles, leather, automobiles, and pharmaceuticals.

But it’s time to hold the line. As the government rightly states, India must take all necessary steps to protect its national interest — as seen in recent trade pacts like the Comprehensive Economic and Trade Agreement with the UK.

America is India’s largest trading partner. Still, the world is larger than the US, and India is a sovereign global power.

India must refuse any trade agreement that is inequitable or detrimental to its farmers, entrepreneurs, and Micro, Small & Medium Enterprises (MSMEs).

No deal is better than a bad deal.

The author is a multi-disciplinary thought leader with Action Bias and an India based impact consultant. He is a keen watcher of changing national and international scenarios. He works as President Advisory Services of Consulting Company BARSYL. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.