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Trump Halts India-US Trade Deal Talks Until Tariff Dispute Resolved

 









Trump Draws a Red Line on India-US Trade Negotiations

US President Donald Trump has refused to move forward with trade deal discussions with India, declaring that talks will resume only after tariff disputes are settled.

The US has already slapped a total of 50% tariffs on Indian imports, pointing to India’s continued purchase of Russian crude oil as the reason.

How the Tariffs Escalated

  • July 30, 2025: Trump announces a 25% tariff on Indian imports.

  • August 7, 2025: First round of tariffs comes into effect.

  • August 6, 2025: Trump signs an executive order adding another 25% tariff—effective August 27.

  • Reason: India’s Russian oil imports, which the US claims indirectly fund Russia’s war in Ukraine.

State Department’s Softer Tone

While Trump has taken a hard stance, the US State Department called India a "strategic partner" and stressed that open dialogue will continue despite the trade tensions.
Spokesperson Tommy Pigott confirmed that the US is addressing trade imbalance concerns and the Russian oil issue directly with India.

Trade Talks in Limbo

India and the US have completed five rounds of talks for a Bilateral Trade Agreement (BTA). The sixth round, planned for August 25, 2025, is now uncertain after Trump’s remarks.

Both sides had aimed to finalize the first phase of a deal by September-October 2025, with a possible interim agreement on the table.

India Called the ‘Tariff King’

Trump’s trade adviser Peter Navarro accused India of imposing some of the highest tariff and non-tariff barriers in the world, making it hard for US goods to enter the Indian market.

Navarro also claimed:

  • India is using US dollars to buy Russian oil.

  • This indirectly funds Russia’s military operations in Ukraine.

Secondary Sanctions on the Horizon

Trump warned of secondary sanctions—not directly on India, but on companies and banks involved in its Russian oil trade. Such measures could disrupt global supply chains and discourage third countries from trading with India in certain sectors.

India’s Firm Response

India’s Ministry of External Affairs dismissed the US tariffs as unfair and unjustified, stating:

  • Oil purchases are based on market conditions to ensure energy security for 1.4 billion people.

  • Many other nations also buy Russian oil but face no similar US action.

Impact on Key Indian Export Sectors

The 50% tariffs—and possible future hikes—pose risks to several high-value export categories:

1. Pharmaceuticals

  • US sources 40% of its generic medicines from India.

  • $7.5 billion worth of Indian pharma exports reached the US in 2025.

  • Trump has threatened to raise tariffs on pharmaceuticals to 250% within 18 months.

2. Smartphones

  • India recently overtook China as the largest smartphone supplier to the US (44% market share in Q2 2025).

  • Currently exempt, but future tariffs could harm competitiveness.

3. Jewelry and Diamonds

  • $9 billion in annual exports, including gold, silver, and diamonds.

  • Higher tariffs could reduce demand and hurt jobs in India’s jewelry hubs.

4. Textiles

  • $2.5 billion in exports, from handmade silk to industrial cotton fabrics.

  • Tariffs could make Indian textiles less competitive against other Asian exporters.

5. Electronics

  • $14 billion in exports such as laptops and servers.

  • Currently tariff-free under a Section 232 review, but may be targeted in the future.

Why the US is Targeting India

  • Russian Oil Dependence:

    • Pre-war imports: 0.2% (68,000 barrels/day).

    • 2025: 1.78 million barrels/day (~45% of imports).

    • Annual spend: Over $130 billion for two consecutive years.

  • The US argues this revenue helps Russia continue its war in Ukraine.

Potential Economic Fallout

  • Higher prices in the US for goods sourced from India.

  • Reduced demand for Indian exports in the American market.

  • Lower trade surplus for India with the US.

  • Job losses in sectors like textiles, gems, and pharmaceuticals.

What’s Next?

Although Trump’s stance appears firm, the State Department’s willingness to talk suggests both sides may seek a compromise.
However, prolonged tariffs—or the introduction of secondary sanctions—could significantly damage India’s export-driven industries in the coming year.


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