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Trump imposes an additional 25% tariff on Indian products, relations reach new low

U.S. president Donald Trump issued an executive directive on Wednesday imposing an extra 25% tariff on Indian products citing New Delhi’s continued imports from Russia. This sharply escalated tensions between both countries after the collapse of trade talks.

The new measure increases tariffs on certain Indian goods up to 50%, making it among the highest for any U.S. trade partner.

The U.S. and India relations have been deteriorating since Trump took office in January.

The announcement comes at the same time that Indian Prime Minister Narendra Modi is preparing for his first trip to China in more than seven years. This could indicate a possible realignment of alliances, as Washington's ties are fraying.

India's External Affairs Ministry said that "India will take any action necessary to protect its own national interests." It was "extremely regrettable" that the US chose to impose tariffs against India in response to actions that other countries also took in their national interest.

India said that its imports are based on factors of the market and aimed to provide energy security to its 1.4 billion population.

Analysts warned that the tariffs would severely affect Indian exports. The order stated that the additional 25% tariff will come into effect 21 day after August 7.

Madhavi Arora is an economist with Emkay Global. She said: "With such outrageous tariff rates, the trade between these two nations would be virtually dead."

Indian officials privately acknowledge the growing pressure on them to return to negotiations. A possible compromise could include a gradual reduction of Russian oil imports, and diversification in energy sources.

An Indian official stated that New Delhi was surprised by the sudden and steep imposition of a new levy, while both countries continued to discuss trade issues.

Trump's announcement follows five rounds inconclusive of trade negotiations that stalled due to U.S. demand for greater access to Indian dairy and agriculture markets.

The tariffs were escalated due to India's refusal of reducing its Russian oil purchases, which reached a record high of $52 billion in the past year.

At this rate, exports to the U.S. are no longer viable. Garima Kapoor is an economist at Elara Securities. She said that the risks to exports and growth are increasing, and there may be renewed pressure on the rupee. "Calls to provide fiscal support will likely intensify."

Trump's executive orders does not mention China which also purchases Russian oil. An official at the White House did not immediately comment on whether a second order would cover those purchases.

Last week, U.S. Treasury secretary Scott Bessent warned Chinese officials to stop buying Russian oil sanctioned by Congress. However, Beijing said it would defend its energy sovereignty.

U.S.-China trade talks have focused on extending the 90-day truce in tariffs that expires August 12 when bilateral tariffs will return to triple-digit numbers. Reporting by Doina chiacu, Andrea Shalal and Manoj Kumar; Editing and proofreading by Caitlin webber and Deepa babington

(source: Reuters)