TARIFF WAR, A REAL THREAT ON INDIAN ECONOMY?

AUGUST 10, 2025, 9:52 PM

Dr. Mathew Joys, Las Vegas

US President Donald Trump has indicated that there will be no further trade discussions with India until existing tariff issues are addressed. This statement followed the US's decision to impose a steep 50 percent tariff on India's purchases of Russian oil, prompting media inquiries regarding future trade negotiations.

India faces several challenges in its trade landscape, including persistent trade deficits, the protectionist policies of various nations, inadequate infrastructure, regulatory hurdles, and fluctuations in global demand. Additional obstacles to trade growth include high tariffs, non-tariff barriers, and the need to comply with international standards.

In light of the tariff announcement, several major US retail companies, including Amazon, Walmart, Target, and Gap, have temporarily ceased importing goods from India, particularly textiles and clothing. The recent tariffs have also adversely affected tea auctions in Kerala, with prices dropping from an average of Rs 183 per kilogram in July to Rs 145 in the latest auction, a decline of up to Rs 38per kg.

The substitution tax imposed will likely impact farmers in Kerala who produce pepper, cardamom, coffee, rubber, and tea, as rising prices may decrease demand for these products in the US market. Other countries, such as Indonesia and Guatemala, have experienced difficulties in their spice markets, although they do not currently face elevated tariff threats.

Significantly, a substantial volume of India's exports to the US includes pepper, rubber, coffee, and cardamom, along with various value-added products. Indian coffee and tea, totaling approximately 5,878 metric tons, are also in fierce competition with products from Vietnam, Kenya, and several Latin American nations.

Notably, 22 percent of India's total rubber exports are directed toward the US market, and the recent tariff increase is expected to have a direct impact on small and medium-sized rubber enterprises in the country. Additionally, India exports between 20,000 to 25,000 metric tons of pepper and its value-added products to multiple countries, with 22 percent of this volume going to the US, and Kerala accounting for 60 percent of total pepper exports.

In summary, the resolution of tariff issues appears to be a crucial prerequisite for any upcoming trade talks between the US and India.

“As history has repeatedly proven, one trade tariff begets another, then another - until you've got a full-blown trade war. No one ever wins, and consumers always get screwed”. (Mark McKinnon)