Description: US President Trump has announced his intention to impose 25% tariffs on Indian imports in the US, due to India’s refusal to constructively engage in the bilateral trade negotiations. Trump also announced that he would impose additional unspecified economic penalties over India’s consistent trading with Russia, in the oil and military equipment industries. Tensions between the two countries have significantly escalated since Prime Minister Narendra Modi visited Trump in Feb, as India has denounced involvement from the US in deescalating the conflict with Pakistan, while Trump hosted Pakistan’s Army Chief, Asim Munir, indicating warmer ties with India’s direct rival. The trade deficit between the two countries has been reported at $45 billion while sectors such as agriculture and dairy products have remained as major sticking points in the bilateral trade negotiations.
Impact: India’s strategic ambiguity directly dissuades the US in softening its approach towards concluding the bilateral trade agreement. The escalation of tensions between the two countries significantly impacts the trade deal, with India continuing to resist pressure on crucial industries such as agriculture and dairy products. The threat from the imposition of 25% tariffs and additional economic penalties would most probably draw India closer to concluding a trade deal with the US as the country aims at maintaining its multi – layered approach towards strategic alliances. The US might enforce stricter trade demands in the next two days, as the final deadline for the 25% tariffs has been set to expire on 01 Aug. India might also pursue closer trade ties with China while agreeing to US demands, as China issued an open call to form economic partnerships with countries mostly impacted by Trump’s tariffs.