Three days after US President Donald Trump warned of raising tariffs on India ‘quickly’, a bill that can take them to as high as 500% could be put to vote in the US congress as early as next week.
Trump after his meeting with co-sponsor of Sanctioning Russia Bill senator Lindsey Graham gave his approval for it. “The bill will allow President Trump to punish those countries who buy cheap Russian oil fuelling Putin’s war machine,” Graham posted on X after meeting Trump.
What did Russia Bill senator say?
“The bill would give president Trump tremendous leverage against countries like China, India and Brazil to incentivise them to stop buying cheap Russian oil that provides financing for Putin’s bloodbath against Ukraine,” he said.
The bill has 84 co-sponsors from among Democrats and Republicans. “I look forward to a strong bipartisan vote, hopefully as early as next week,” Graham said.
Among many provisions of the bill that seek to pressurise Russia to end the conflict in Ukraine, it makes it incumbent on the President to increase the duties on countries trading in Russian goods.
“The President must increase the rate of duty on all goods and services imported into the United States from countries that knowingly engage in the exchange of Russian-origin uranium and petroleum products to at least 500% relative to the value of such goods and services,” the summary of the Bill said.
Economic Implications for Indian Exports
“A 500% tariff on goods – and potentially on services via secondary measures – could effectively halt the entire $ 120 billion annual exports to the US,” founder of Global Trade Research Initiative (GTRI) Ajay Srivastava said.
“There is no legal mechanism to tariff services. Any escalation would therefore likely focus on taxing US firms on payments for Indian services exports,” he added.
Other provisions of the Bill propose several restrictions on persons or entities engaging with Russia but do not impact India directly. India is already dealing with 50% additional tariffs on its exports to the US justified under the laws dealing with national security and unfair trade practices.
The additional tariffs that were imposed on India and all trade partners of the US face a challenge in the US. On Friday the US Supreme Court is expected to give a ruling in cases that cast doubts over the legality of these tariffs as they were imposed without the authority of US congress.
Declining Indian Imports of Russian Crude
Even if the US Supreme Court strikes down the reciprocal tariffs, the Sanctioning Russia Act will keep up pressure on India. Both Trump and Graham have acknowledged that India has reduced its purchases of oil from Russia. The decline to 1.2 million barrels per day in December, the lowest in three years and down from 1.84 million barrels in November, has been reported by market intelligence firm Kpler.
India’s largest private refiner Reliance Industries on Tuesday also said that it has not received any Russian oil supplies for the past three weeks and nothing is expected in January too.
The resolution of the Russian-India oil issue is essential for India and the US to conclude the interim trade deal and Bilateral Trade Agreement (BTA). The deal could bring down additional tariffs which could be a big relief to exporters in labour-intensive sectors like textiles and apparel, marine products, gems and jewellery and leather. A bilateral agreement could also help dodge the 500% tariff bullet that is being worked up on. However, there has been no update on further engagement on the negotiations.
The last high-level engagement between the two sides happened in December 9-10 when a delegation from the office of US Trade Representative (USTR) led by Deputy USTR Rick Switzer accompanies by Assistant USTR Brendan Lynch visited New Delhi for two days of talks.