Despite Trump’s Harsh Tariffs, U.S. Official Sees Hope in India–U.S. Ties

US President Donald Trump has enforced a 50% tariff on Indian goods. This includes an additional 25% levy due to India's Russian oil purchases. US Treasury Secretary Scott Bessent described the bilateral ties as "complicated" but remained hopeful for future collaboration. He expressed optimism that both nations would eventually find common ground despite current challenges.

Bessent, in a Fox Business interview, mentioned his expectation of a trade agreement with India by May or June. He noted that India's negotiation approach was "performative," contrasting with his earlier view of New Delhi being "a bit uncooperative." He remarked, "The Indians came in early after Liberation Day to start negotiating on tariffs and we still don't have a deal."

Impact of Tariffs on Indian Exports

The Global Trade Research Initiative (GTRI) anticipates that US tariffs will affect Indian exports worth USD 60.2 billion. Labour-intensive sectors like textiles, gems, jewellery, shrimp, carpets, and furniture might see shipments decrease by up to 70%, impacting millions of workers. Analysts warn these higher levies could hinder growth prospects across various sectors.

Trump's executive order on August 6 added another 25% tariff on Indian goods, following an initial 25% levy on August 1. This decision stemmed from India's ongoing purchase of Russian oil. In response to Western sanctions against Russia due to its invasion of Ukraine in 2022, Moscow offered significant discounts which India capitalised on.

India's Response to US Tariffs

Prime Minister Narendra Modi emphasised his commitment to protecting the interests of farmers, small industries, and domestic producers amid rising US tariffs. At a rally in Ahmedabad, he stated, "Pressure on us may increase, but we will bear it all," urging citizens and businesses to prioritise swadeshi goods.

Bessent highlighted the strong bond between PM Modi and Trump despite the complex relationship between the two countries. He said, "This is a very complicated relationship. PM Modi and Trump have a very good relationship at that level... I do think India is the world's largest democracy and the US is the world's largest economy."

Concerns Over Rupee's Status

The Treasury Secretary dismissed speculation about the rupee becoming a global reserve currency. He stated, "A lot of things I worry about. The rupee becoming the reserve currency isn't one of them." Meanwhile, the rupee depreciated by 22 paise against the US dollar recently due to concerns over additional tariffs.

Bessent previously criticised India's purchase of discounted Russian crude oil and its resale as refined products as "unacceptable" arbitrage. He urged European nations to impose sanctions on Russia similar to those by Washington instead of criticising the United States.