India, July31,2025: Congress MP Shashi Tharoor, responding swiftly, described the development as a “very serious matter”. He cautioned that the combined tariff and penalty could reach 35–45%, with talk of a 100% secondary penalty—
What Is the US‑India Tariff Shock
On July 30, 2025, U.S. President Donald Trump announced a 25% tariff on Indian imports effective August 1, alongside an additional unspecified penalty linked to India’s ongoing purchases of Russian crude oil and defense equipment.
This aggressive move has been dubbed the US‑India Tariff Shock, signaling escalating pressure in trade diplomacy.
Tharoor’s Warning: “It Could Destroy Our Trade”
Congress MP Shashi Tharoor, responding swiftly, described the development as a “very serious matter”. He cautioned that the combined tariff and penalty could reach 35–45%, with talk of a 100% secondary penalty—a scenario he warned would “destroy our trade with America”.
Tharoor emphasized:
“If you are going to talk about 100% penalty, then you are going to destroy our trade”.
Tariffs + Penalties: How High Could They Go
25% base tariff announced.
- Unspecified penalties for purchasing Russian oil and weapons could raise effective duties to 35–45%.
- Worse, if secondary sanctions escalate, 100% penalty is possible.
Industry economists estimate this could dent Indian GDP growth by up to 0.4% in FY 2025‑26 and prompt rupee depreciation and stock market volatility.
Ongoing Negotiations and Possible Relief
India and the U.S. have been engaged in trade negotiations since March 2025, aiming to conclude a fair and balanced bilateral trade agreement by Q3 2025.
Tharoor expressed hope negotiations could reduce the tariff or penalties—but warned India must be willing to walk away if demands become unreasonable.
Sector‑by‑Sector Fallout
Key exports at risk include:
- Jewels & gems, textiles, pharmaceuticals, electronics, machinery—India exported nearly $90 billion to the U.S. in 2024.
Analysts warn:
- Job losses in labor‑intensive sectors like jewelry.
- Higher medical costs in the U.S. due to tariffs on Indian generic drugs.
- Manufacturing output slowdown and stress for MSMEs.
Options Beyond the U.S.: Diversification Strategy
Tharoor argued India should diversify export markets, citing ongoing negotiations with the EU, UK, and others, and stated that India is not fully dependent on American demand.
He noted: “We have strong domestic demand and can pivot to alternate trade partners if U.S. terms are untenable.”
Why India Should Push Back
Tharoor underscored India’s right to resist unreasonable demands and insisted the U.S. should understand Indian economic constraints:
- India’s average tariffs on U.S. goods stand at ~17%, which is considerably lower than what the U.S. now threatens.
- U.S. goods are often not competitively priced for the Indian market.
- India’s negotiators must preserve national interest above accelerated trade terms.
Can India Avert the Damage
The US‑India Tariff Shock represents both a major test and a negotiating lever. While tariffs may be trimmed via diplomacy, worst-case scenarios could inflict substantial damage to export revenues and economic growth. Tharoor’s stark warnings underline India’s need to assert terms firmly, diversify partners, and ensure any deal placed on the table serves national interests, not sales targets.
Only bold, principled negotiation—backed by readiness to walk away—can salvage a fair outcome without sacrificing India’s strategic autonomy.
