Trump’s Tariffs May Hurt US Manufacturers, He’ll Back Down If India Stands Firm: Observers

Last Updated:August 07, 2025, 08:39 IST

Their comments came in the aftermath of President Donald Trump’s decision to impose an additional 25% tariff on Indian goods, citing India’s continued imports of Russian oil.

Trump’s move follows five unsuccessful rounds of trade negotiations, largely stuck over US demands for access to India’s agricultural and dairy markets (File pic/AP)

US President Donald Trump’s steep new tariffs on Indian goods have sparked sharp concerns among American manufacturers and policy experts, who warn that the move could ultimately backfire on the United States and damage ties with one of its key global allies.

Former Republican Governor Chris Sununu said, “The tariffs on India are scaring US manufacturers the most. India is going to be the world player in the future. They are our ally."

Market analyst David Woo added, “If the Indians hold out, they might find that Trump will chicken out. Trump has no appetite for higher oil prices. So the question is whether Modi will play this game of chicken with Trump."

Their comments came in the aftermath of President Donald Trump’s decision to impose an additional 25% tariff on Indian goods, citing India’s continued imports of Russian oil. The move, which follows a breakdown in trade negotiations, threatens to hit nearly 55% of Indian exports to the US, its largest export market.

Effective 21 days from August 7, the new tariff hikes will raise duties on key Indian exports like textiles, footwear, gems, and jewelry to as high as 50%—one of the steepest rates ever levied on a US trade partner. Notably, Trump’s executive order does not target China, another major importer of Russian oil, though he later hinted at possible actions against Beijing too.

The decision marks a serious downturn in US-India relations, which had warmed earlier this year following a high-profile bilateral summit. Analysts say Trump’s tone has since hardened dramatically, with the President recently calling India’s economy “dead" and accusing it of profiting from discounted Russian crude while ignoring the humanitarian crisis in Ukraine.

India’s Ministry of External Affairs called the tariff decision “extremely unfortunate," reiterating that Russian oil imports are driven purely by market conditions and the energy needs of its 1.4 billion citizens. “India will take all necessary steps to protect its national interests," the ministry added.

The timing is significant since Prime Minister Narendra Modi is set to visit China for the first time in over seven years, a move that could hint at shifting geopolitical priorities as relations with Washington become strained.

Meanwhile, the economic repercussions are already visible. The rupee weakened in offshore markets, Indian stock futures dipped, and oil prices ticked up by 1% as the market reacted to the White House’s decision and news of a surprise drop in US crude inventories.

Trade analysts are warning of a serious blow to Indian exporters. “This is a severe setback," said S.C. Ralhan, president of the Federation of Indian Export Organisations. “Nearly 55% of our shipments to the U.S. will be affected." The increased duties, he said, leave Indian exporters at a 30–35% disadvantage compared to competitors in Vietnam, Bangladesh, and Japan.

“With such obnoxious tariff rates, trade between the two nations would be practically dead," said Madhavi Arora, economist at Emkay Global.

Despite the public rhetoric, Indian officials remain hopeful of a diplomatic resolution. One senior government source noted that the 21-day implementation window could be a signal from the White House that it’s still open to talks. However, there are currently no plans for a retaliatory tariff or for Modi to visit Washington.

Instead, India is exploring domestic relief measures for exporters, including interest subsidies and credit guarantees. Still, economists warn that the impact could ripple across the broader economy, with GDP growth potentially falling below 6% this year.

Trump’s move follows five unsuccessful rounds of trade negotiations, largely stuck over US demands for access to India’s agricultural and dairy markets. India’s refusal to scale back its record $52 billion in Russian oil imports was the final breaking point.

For now, both nations stand at a crossroads—with tariffs rising, tempers flaring, and two strategic partners suddenly finding themselves on opposite ends of a global trade standoff.

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