Finance
As the tariff deadline approached, US President Donald Trump implemented the promised 25% duty on India beginning Friday, as long-running negotiations looked to have stagnated.
His executive order, published late Thursday, did not include penalty tariffs for purchasing Russian energy or for BRICS participation, which he has previously warned.
When Trump initially threatened the 25 per cent tariff, India said defiantly that it “will take all steps necessary to secure our national interest”.
In the order setting the tariff rates for various countries, he claimed he was acting because “large and persistent annual US goods trade deficits constitute an unusual and extraordinary threat to the national security and economy of the United States”.
The 25 per cent tariff for India was higher than the rate ranging between 15 per cent and 19 per cent he imposed on most countries listed in the order, which takes effect at midnight (9.30 a.m. in India).
While India was one of the first countries to start negotiations with the US, the talks appeared to have foundered, and Trump made the threat of 25 per cent on Wednesday, but later that day, he held out a ray of hope, saying, “We’re talking to India now, we’ll see what happens”.
He also did not issue a formal letter to India as he had to other countries.
But it appears that last-minute negotiations did not lower the tariffs.
During the conversations, Trump regularly referred to Prime Minister Narendra Modi and India as friends.
He stated last week that an agreement was imminent.
Piyush Goyal, India’s Commerce Minister, also expressed optimism, stating last week that the negotiations were making “fantastic” progress.
The section of his executive order that would apply to India stated that some “trading partners, despite having engaged in negotiations, have offered terms that, in my judgment, do not adequately address imbalances in our trading relationship or have failed to align sufficiently with the United States on economic and national-security matters.”
The highest tariff among those in the order was set for Myanmar at 41%, while the lowest was 10% for Brazil and Britain.
Brazil’s rate was surprising given that Trump had threatened 50% in a disagreement over Brazil’s prosecution of former President Jair Bolsonaro.
In a last-ditch effort, Trump decided to extend the deadline for Mexico, allowing negotiations to continue.
Canada, with whom Trump is at odds, was not mentioned in the order, but he had imposed a separate duty of 30%.
Talks with China are ongoing, and under a temporary agreement set to expire on August 12, its rate is temporarily 30%, which is significantly lower than his earlier warnings of up to 145%.
His order established the tariffs for Pakistan at 19%, Sri Lanka and Bangladesh at 20%.
A major hurdle for India was the US’ insistence on opening the floodgates to US agriculture and dairy.
That could have serious consequences for India’s agricultural sector, which employs nearly half the country’s working population.
India’s statement responding to Trump’s threat alluded to this factor, saying, “The government attaches the utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, and MSMEs (Micro, Small, and Medium Enterprises)”.
While some, like the European Union and Japan, mollified Trump by offering to invest hundreds of billions of dollars in the US, India was not in a position to make offers of that magnitude.
India also appears to have been caught in the heightened tension between Trump and Russia, after President Vladimir Putin refused to heed the US president’s call for a ceasefire in the Ukraine War.
Trump brought up New Delhi buying Russian oil on Wednesday, and on Thursday, India was in the crossfire in a war of words between him and former Russian President Dmitry Medvedev, even though India had nothing to do with it.
In the Truth Social post attacking Mededev, he brought in India out of the blue: “I don’t care what India does with Russia. They can take their dead economies down together, for all I care”.
As he had for several months, he riled against the high Indian tariffs, having declared India the “Tariff King”, an appellation Finance Minister Nirmala Sitharaman has strongly refuted.
In her budget in February, she substantially lowered the tariff on premium motorcycles that would cover Harley Davidson, the duties on which were Trump’s pet peeve since his first term.
Trump may have to take separate action on India’s pharmaceutical exports, which totaled $12.7 billion last year, because they account for a substantial share of generic drugs in the United States, and any price increases would hurt already high medical expenditures.
When asked by a reporter on Wednesday about the penalty for buying Russia’s oil, which he had previously stated would be 100%, he avoided answering and instead discussed a penalty for BRICS membership.
If there is a penalty for purchasing Russian oil (known as a secondary tariff that applies to all purchasers), it will be linked to Moscow’s deadline to stop the Ukraine War, which is expected to be August 7.
Because China is also purchasing Russian energy, imposing secondary penalties will be difficult as Washington and Beijing want to prevent a full-fledged trade war.
A BRICS penalty would also affect China.
Source: IANS
