The US on Wednesday announced that it would impose an additional 25% tariff on India because of the latter's import of Russian oil, bringing the combined total to 50%, the joint highest among all countries so far.
The imposition is likely to markedly deteriorate relations between the world's richest country and its most populous nation.
Brazil is the only other country facing tariffs as high as India's.
The tariffs would kick in 3 weeks after the signing of the order, meaning that both India and Russia may have time to negotiate with the Trump administration on the import taxes.
This comes amid US President Donald Trump's threat last week that he would penalise New Delhi for buying Russian oil and arms, venting his frustration over an impasse in trade talks and referred to both countries as "dead economies".
The move caught most experts by surprise as New Delhi was one of the first to set off trade negotiations with Washington DC, and all the more so because Trump and Indian Prime Minister Narendra Modi have repeatedly spoken well of each other in public statements and called each other friends, reports Al Jazeera.
India is now part of a small group of major economies without a negotiated tariff deal with the US. And it now faces the highest tariff rate globally.
According to experts, this move signifies that Trump is more interested in onshoring than friend-shoring.
"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," Vina Nadjibulla, vice president of strategy and research at the Asia Pacific Foundation of Canada.
US-India relations: a power play of economy and politics
Last year, India's trade with the US hit $212 billion, with a $46 billion surplus in India's favour. Prime Minister Modi has said he has plans to more than double that to $500 billion within five years.
New Delhi offered to cut levies on US industrial goods, ramp up defence and energy imports, and reduce car taxes as well, despite domestic pressure, as part of their earlier tariff talks. However, it refused to ease duties on farm and dairy products, referring to political sensitivity and economic vulnerability.
But the disagreement goes beyond trade. According to Farwa Aamer of the Asia Society Policy Institute, geopolitics is increasingly playing a role in the negotiations.
One flashpoint was the four-day conflict between India and Pakistan in May, the most severe in decades between the nuclear-armed neighbours, ending with Trump supposedly brokering a ceasefire, for which he actively took credit.
However, India denied any US role, emphasising its bid to deal with its neighbour bilaterally. Pakistan, however, upheld Trump and is reportedly set to nominate him for the Nobel Peace Prize, as the country is also securing US agreements on mineral and oil exploration.
This complex landscape has left New Delhi navigating a difficult path. "This will test India's foreign policy," Aamer told Al Jazeera.
"The question is whether it can deepen US ties while maintaining its longstanding relationship with Russia."
India slammed Wednesday's tariffs as "unfair, unjustified, and unreasonable," defending its Russian oil imports as necessary for energy security.
"India doesn't want to look weak," Aamer added. "Modi's global image compels him to stand firm. National security is driving foreign policy."
Brewing instability
India is also trying to stabilise relations with China, just as Australia, Canada and Japan have done in recent months since Trump took office and hit long-standing allies with tariffs.
Prime Minister Narendra Modi is set to visit China for the first time in over seven years, since the Galwan River valley confrontation in 2020, an Indian government source said on Wednesday, in a further sign of a diplomatic thaw with Beijing as tensions with the United States (US) rise, according to Reuters.
Modi will go to China for a summit of the multilateral Shanghai Cooperation Organisation that begins on Aug. 3.
Moreover, the trade blow from the US also comes at a time when India has been trying to position itself as a manufacturing hub and as an alternative to China.
In April, Apple announced that all iPhones sold in the US would be assembled in India by next year.
While electronics are exempt for now from the tariffs, a country with a 50% tariff tag is hardly going to attract for business, and this just "adds to the instability and uncertainty that businesses were already feeling" because of all the Trump tariffs, Nadjibulla said.
Comments