India Holds Its Ground Amid Trump's Tariff Threats

Its best bet is to continue negotiating deal, analysts note, amid high stakes for Modi

- Nirmala Ganapathy

NEW DELHI - The Modi government found itself in an unenviable position with limited choices after US President Donald Trump levied a 25 percent tax on India from Aug 1 and threatened it with an additional penalty for doing business with Russia.

Still, analysts noted, India's best bet is to continue negotiating a trade agreement, which has been stuck over the quantum of American access into the Indian market, particularly in the agriculture and dairy sectors.

After calling India a "friend," Mr. Trump blasted India in a Truth Social post on July 30, saying the country had "the most strenuous and obnoxious non-monetary Trade Barriers of any Country."

He also warned that India would have to pay a "penalty" for buying a large portion of its military equipment from Russia and is "Russia's largest buyer of ENERGY, along with China."

India had hoped its close ties with the US and shared concerns over the growing assertiveness of China would shield it from the worst of the tariffs.

Instead, at 25 percent, the tariff on India is higher than that for most of its Asian peers, including Japan at 15 percent, as well as for the European Union, also at 15 percent.

India's oil bill is expected to go up and exports to the US in pharmaceuticals and electronics, among others, are set to become less competitive.

MODI CAN'T AFFORD TO IGNORE DOMESTIC CONSTITUENCY Still, Mr. Trump's latest tariff threats are being viewed in India as a negotiating tactic to push for greater access into the Indian market.

For now, the Indian government appeared to be holding its ground, saying it would protect farmers and small businesses, underlining how the stakes are high for Prime Minister Narendra Modi.

"The government will take all steps necessary to secure our national interest, as has been the case with other trade agreements," the Ministry of Commerce and Industry said on July 30.