US President Donald Trump announced a secondary tariff of 25% on India, which is scheduled to come into effect from August 28. This was not entirely unexpected, especially as President Donald Trump had recently threatened “substantial” tariffs on India. Stacking this on top of the 25% “reciprocal” tariffs announced on July 30 takes the total tariff to 50%.

Based on comments made by the president in his latest executive order, these secondary tariffs have little to do with the trade deficit that India runs with the US, and more with the “threat to the United States by the government of the Russian Federation”. We would assume that if Russia engages, or agrees to engage, in peace talks with Ukraine, these secondary tariffs may well be reconsidered. After all, India is not the only country that imports oil from Russia, and other such importing nations have yet to face similar tariffs.

For clarity, as of now the reciprocal tariff of 25% is in effect and the secondary tariff will come in effect from August 28. If and when both reciprocal and sectoral tariffs are implemented, we estimate that the total US tariff rate on India in trade-weighted terms would be 35.6%, much higher than 20.6%, including the reciprocal and sectoral tariffs. This secondary tariff, if implemented, would certainly dent India’s growth outlook, but we believe that this announcement could be another negotiation tactic, and final US tariffs on India could end up lower than the announced 50% rate. There are hopes that the US delegation’s scheduled visit to India on August 25 for a sixth........

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