The recent imposition of a 50% tariff by the US on Indian imports has led to a significant deterioration in India-US trade relations and the collapse of trade deal negotiations that had been underway.

The talks, initially expected to conclude successfully, fell through after five rounds due mainly to disagreements over opening India's vast agricultural and dairy sectors to US products and India's continued purchase of discounted Russian oil despite US pressure.

Prime Minister Narendra Modi firmly rejected US demands, emphasising India's commitment to protecting its farmers and national interests, even at the cost of economic consequences. India's Ministry of External Affairs labelled the US tariffs as "unfair, unjustified and unreasonable," asserting that India's oil imports are economically, not politically, determined.

Chinese Ambassador to India, Xu Feihong, sharply criticised US President Donald Trump's tariff policy towards India, stating "Give the bully an inch, he will take a mile," and condemned the use of tariffs as a weapon to suppress other countries as violating the UN Charter and WTO rules, calling it unpopular and unsustainable.

His comments came in the context of Trump's threats to impose additional tariffs on China for similar reasons related to Russian oil purchases amid the ongoing Russia-Ukraine war. China itself has experienced a tariff war with the US, where tariffs were raised up to 145%, but China maintained that further US tariff hikes would be economically meaningless and embarrassing for the US historically. Trump also announced plans to meet Chinese President Xi Jinping to try and formulate a trade deal this year despite the tensions.

The 50% tariffs began with a first tranche of 25% imposed on August 7, with the second expected to follow three weeks later, potentially severely impacting India's $87 billion exports to the US, which account for about 2% of India's GDP. Key export sectors including garments, pharmaceuticals, gems, and petrochemicals face heavy tariffs, although pharma exports could be somewhat shielded due to different duty structures.

Experts believe the tariffs could stall bilateral trade and also spill over into visa policies and service outsourcing, which are vital for India's tech industry. Indian officials remain hopeful for resumed closed-door talks, with a US trade delegation expected in Delhi later in August, pressing for resolution, although Prime Minister Modi expressed readiness to "pay a heavy price" to protect domestic sectors.

India's defence of its sovereign right to determine its energy sources, including imports from Russia, remains a central point of contention with the US. India currently sources over a third of its oil from Russia, alongside supplies from Iraq, Saudi Arabia, and the UAE. New Delhi is exploring alternative suppliers but remains committed to its strategic autonomy.

Meanwhile, India is also engaging with other partners including Russia and China, the latter marking an uptick in diplomatic visits and trade discussions following recent tensions. Brazil, another country targeted by US tariffs, alongside India, is also coordinating responses within the BRICS framework.

In short, the US tariff imposition has caused a breakdown in the anticipated US-India trade agreement that hinged on contentious issues such as tariff rates, market access in sensitive sectors, and geopolitical alignments over Russian oil.

China's ambassador's remarks highlight a broader international criticism of US tariff strategies as overreaching and damaging to global trade norms. Both India and China face US tariff threats reportedly linked to the Russia-Ukraine conflict, complicating efforts toward smoother cooperation and negotiation.

Agencies