India’s Commerce and Industry Ministry said the government had taken note of Trump’s statement and is “studying its implications”. “India and the US have been engaged in negotiations on concluding a fair, balanced and mutually beneficial bilateral trade agreement over the last few months. We remain committed to that objective. The government attaches the utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, and MSMEs,” the ministry said in a statement.

The government will take “all steps necessary to secure our national interest, as has been the case with other trade agreements including the latest Comprehensive Economic and Trade Agreement with the UK,” the ministry said.

Hours later, Trump hardened the rhetoric.

Speaking to reporters in the White House after his announcement, Trump also took note of India’s BRICS membership, terming the bloc as “an attack on the dollar and we are not going to let anybody attack the dollar”.

“Prime Minister Modi is a friend of mine, but they don’t do very much business with us. They sell a lot to us but we don’t buy from them…because the tariffs are so high. They have one of the highest tariffs in the world. Now, they are willing to cut it very substantially. But we will see what happens. We are talking to India now, we will see what happens. It doesn’t matter too much whether we have a deal or whether we charge them a certain tariff. But you will know at the end of this week,” Trump said.

The announcement of the 25 per cent tariff plus a ‘penalty’ comes ahead of the visit of US officials to India later next month on August 25 for the next round of negotiations over the proposed bilateral trade agreement. The fifth round of talks between India and US were concluded last week in Washington.

Trump’s decision to announce the tariff and penalty on Indian goods comes two days before his August 1 deadline, when the reciprocal tariffs announced on several countries will come into effect.

The decision to announce the 25 per cent tariff is being seen as a way to pressure India into agreeing to the demands made by the US. White House economic adviser Kevin Hassett was reported to have said on Wednesday that Trump has been frustrated with how the trade deal negotiations with India have gone and “believes his 25 per cent tariff announcement will help the situation,” news agency Reuters reported.

At 25 per cent, the tariff on India is just below the 26 per cent reciprocal rate Trump had announced in early April. However, it is higher than the levels agreed between the US and Asian countries such as Vietnam (20 per cent) and Indonesia (19 per cent).

‘Penalty’ for Russian imports

In his post on Truth Social, the US President also said that India would face a ‘penalty’ in addition to the 25 per cent tariff because of its imports of Russian energy items and defence equipment. The proposed ‘penalty’ for the import of Russian goods marks the first use of secondary tariffs by the US.

“Also, they have always bought a vast majority of their military equipment from Russia, and are Russia’s largest buyer of ENERGY, along with China, at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE — ALL THINGS NOT GOOD! INDIA WILL THEREFORE BE PAYING A TARIFF OF 25%, PLUS A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST,” Trump said in his post.

India’s import of crude oil from Russia has surged in recent years, rising to 35-40 per cent of its total purchases from less than 1 per cent prior to the invasion of Ukraine in early 2022, which sent global crude oil prices sharply higher.

After China, India is the second-largest buyer of Russian crude oil. Historically, India’s oil purchases have primarily been from Iraq and Saudi Arabia.

The size of the ‘penalty’ announced by Trump was not immediately known. According to Reuters, Kevin Hassett told reporters on Wednesday that Trump and US Trade Representative Jamieson Greer “will have more information ‘shortly’ on the additional penalty”.

‘Massive trade deficit’

In a second post on Truth Social minutes after he announced the 25 per cent tariff, Trump said the US has a “MASSIVE TRADE DEFICIT WITH INDIA!!!”

In 2024, the total goods trade between India and the US stood at $129.2 billion. While the US’ exports to India in calendar year 2024 rose 3.4 per cent to $41.8 billion from 2023, its imports from India increased by 4.5 per cent to $87.4 billion, resulting in a goods trade deficit of $45.7 billion. The deficit was 5.4 per cent higher than in 2023.

India’s main exports to the US included drug formulations and biologicals, telecom instruments, precious and semi-precious stones, petroleum products, vehicle and auto components, gold and other precious metal jewellery, readymade cotton garments, and iron and steel products. Meanwhile, its main imports include crude oil, petroleum products, coal, cut and polished diamonds, electric machinery, and aircraft, among others.

The US President has cited a deficit with its trade partners as a negative for the world’s largest economy, calling for fairer trade relations. The Trump administration has hence aggressively pursued trade agreements with various countries, signing one with the European Union (EU) earlier this week.

As part of the trade deal, imports from the EU into the US will face a tariff of 15 per cent and will see American goods get “unprecedented levels of market access”, according to the White House. Further, the EU will purchase $750 billion of US energy goods and invest $600 billion in the US by 2028.