Trade shock demands a resolute response

With a 25 per cent tariff shock and fresh FTA pressures, Trump's aggressive trade agenda threatens Indian agriculture, exports, and the rupee.

- SANTHOSH MATHEW

"Earlier, trade followed politics; now, politics follows trade." This quote aptly captures the shifting sands of the India-US relationship, where economic interests increasingly dictate diplomatic alignments. The latest salvo in this high-stakes game came from U.S. President Donald Trump, who announced a 25 per cent tariff and penalties on Indian imports, sending shockwaves through both economies.

Trump's announcement, posted on Truth Social, was blunt: starting August 1, Indian goods entering the U.S. would face a steep 25 per cent tariff, plus additional penalties for India's continued crude oil purchases from Russia and its "unfair trade barriers." He accused India of being the "highest-taxing nation in the world" and reiterated his long-standing criticism of India's trade practices.

While calling India a "friend," his tone and policies spoke otherwise. At the heart of this tension is the stalled India-US Free Trade Agreement (FTA). Once described by Trump as a "very big trade deal," the FTA has become a symbol of imbalance, with India being pushed to open its markets to heavily subsidized American products while receiving few concessions in return.

Indian agriculture is the most threatened sector under Trump's renewed tariff and trade agenda. The U.S. dairy industry alone receives about $12 billion in annual subsidies. With tariff barriers lowered, American whey powder, skim milk, and cheddar cheese could flood Indian markets at prices local farmers can't compete with. While U.S. cheddar sells for Rs 300/kg, Indian producers need at least Rs 475 to break even. Over 75 million Indians involved in dairy could face economic ruin.