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In a move that has sent ripples through global trade circles, the United States has imposed a 25% tariff on a broad range of Indian imports, marking a significant escalation in bilateral trade tensions. The decision, announced by the Office of the U.S. Trade Representative (USTR) late last week, comes after years of stalled negotiations over a comprehensive trade agreement, with both nations failing to resolve disputes over market access, tariff barriers, and regulatory frameworks.

Economists at the Australia and New Zealand Banking Group (ANZ) have warned that the tariff could trigger a cascade of economic repercussions, not only for India’s export sector but also for the broader stability of U.S.-India relations.

A Blow to "Strategic Partnership" Ambitions

For over a decade, the U.S. and India have positioned themselves as "natural allies," emphasizing shared democratic values and a common interest in counterbalancing China’s influence in the Indo-Pacific.

This strategic alignment has been mirrored in efforts to deepen economic ties: bilateral trade in goods and services surged from $66 billion in 2010 to over $191 billion in 2024, making the U.S. India’s second-largest trading partner, and India the U.S.’s ninth-largest.

However, beneath this growth lies a history of unresolved frictions. Negotiations for a bilateral trade deal, launched in 2018, have repeatedly hit roadblocks. The U.S. has long pushed India to lower tariffs on American agricultural products such as dairy, almonds, and poultry, while India has sought greater access for its IT services and pharmaceutical exports, as well as relief from U.

S. restrictions on H-1B visas—critical for its tech workforce. Disagreements over India’s digital services tax (imposed on U.S. tech giants like Google and Amazon) and intellectual property protections for pharmaceuticals have further strained talks.

The new tariff, which targets over 200 Indian products—including textiles, leather goods, machinery, and certain electronics—was framed by the USTR as a response to India’s "unfair trade practices," including its continued use of high tariffs on U.

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