Indian govt may help exporters cushion impact

Mumbai, Aug 29

Additional 25 per cent tariff imposed as punishment for India buying Russian oil Tariffs of up to 50 per cent threaten Indian exporters and jobs. Source says hopeful US will review punitive tariff.

Moreover, Indian govt may help exporters cushion impact, source says. India will buy energy from sources of its choice, minister has already said.

The United States has imposed additional 25 per cent tariff on Indian imports, doubling total duties to 50 per cent, primarily as retaliation for India’s continued purchase of Russian oil, which Washington claims indirectly supports Russia’s war in Ukraine.

Talking to Bizz Buzz, MV Hariharan, ex-treasury head, SBI says, “USA is gradually losing all its bargaining power, having weaponised its currency. This is totally foolish, unrealistic, impractical, high stakes gamble it's certain to lose and self-defeating.”

Countries are now actively looking for alternatives to the greenback and will definitely pursue all available options for continuing their trade with each other, excluding the isolationist Yanks in the process.

The domestic audience of the country is equally affected which is already playing out.

With a bloated Federal Reserve balance sheet, in excess of US$ 40 trillion, and frequent fiscal cliffs being encountered there, the clueless policy makers and misguided leaders of the country are setting up the country for rapid unraveling and possibly "Yankxit" with the looming pains of such tunnel vision thinking front and centre.

The new tariffs took effect August 27, targeting a broad range of Indian goods such as textiles, gems, jewellery, footwear, chemicals, sporting goods, and furniture.

This is among the steepest tariffs ever levied by the US on any Asian country, matching only select penalties placed on nations like China and Brazil.

Reasons behind the Tariff are galore.

The US administration, led by President Donald Trump, justified the escalation as a punitive measure for India’s purchasing of Russian oil at discounted rates, which is viewed as helping Russia finance its war in Ukraine.

Former central banker Raghuram Rajan described the tariffs as a display of political and economic power, meant to project force beyond traditional trade tools and, in Trump’s view, to “level the playing field” against what he sees as unfair trade deficits.

US advisers have explicitly linked tariff reductions to India abandoning Russian oil, signaling the measure is intended as economic leverage.

Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisor says, “These tariffs threaten India’s major export sectors, placing at risk thousands of small exporters and manufacturing jobs, especially in labour-intensive industries like textiles and jewellery.”

The Indian government has voiced strong opposition, declaring its intent to continue energy imports based on national interest and promising support to affected sectors.

American consumers may experience price hikes on affected products, and the tariffs could reverberate through supply chains shared by US companies operating in India.

Diplomatic relations have reportedly suffered, with analysts warning that this move undermines years of partnership and goodwill between the two democracies.

Indian officials estimate about $48.2 billion of exports are impacted, with industries such as textiles, gems, jewellery, leather goods, and automotives hardest hit.

No substantive trade negotiations are underway to lower tariffs, and experts suggest that the action is an overt exercise of economic power—one that could result in India seeking closer ties with other global powers like Russia or China, in response to American pressure.

Business groups and policymakers both in India and the US are now evaluating countermeasures and mitigation strategies to cushion the blow.

Indian government sources have stated they are hopeful the US will review the additional 25% tariffs imposed on Indian goods due to its purchase of Russian oil. This optimism follows five failed rounds of trade talks, but Indian officials have confirmed continued diplomatic efforts and outreach, expressing confidence that open communication with Washington could lead to reconsideration of the new tariff regime.

An Indian government spokesperson announced that discussions with major exporters are underway to adapt strategy for impacted sectors like textiles, gems, and jewellery, aiming to boost exports to alternative markets while awaiting possible relief from the US.

Financial assistance is also being planned for affected businesses, showing India’s readiness to support its exporters during the current period of uncertainty.

Authorities have conveyed to the public that “there is no cause for panic”, underscoring that the government considers the issue manageable and expects future resolution through negotiation.

Indian leaders continue to insist on national energy security priorities but have also signalled a willingness to keep discussions with US counterparts open.

Some US officials have also expressed optimism about the long-term relationship, suggesting that, despite trade disputes, both nations will seek eventual agreement and compromise.

EoM.