Trade shock demands a resolute response

With a 25 percent tariff shock and fresh FTA pressures, Trump’s aggressive trade agenda threatens Indian agriculture, exports, and the rupee. “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 US President Donald Trump, who announced a 25 percent tariff and penalties on Indian imports, sending shockwaves through both economies.

- By SANTHOSH MATHEW

Trump’s announcement, posted on Truth Social, was blunt: starting August 1, Indian goods entering the US 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 longstanding 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 subsidised 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 US 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. The cultural clash deepens this divide. Many US dairy products are made using rennet, an enzyme derived from slaughtered calves, and cattle feed often contains animal byproducts — both violate Indian religious sentiments. Any attempt to allow such imports would trigger social unrest, adding to the economic shock. India also faces a soybean tsunami. Following the US-China trade war, over 46 million tonnes of American soybeans piled up. Now, India is being eyed as the next dumping ground.