(MENAFN- Live Mint) Starting Wednesday, the US will impose a heavy 50% tariff on certain Indian goods, the highest rate in Asia, as US President Donald Trump moves forward with the penalties to penalise New Delhi for its purchase of Russian oil.

Here are the top ten updates:

1. The new tariffs will double the current 25% duty on Indian exports, which began on August 7, further straining the relationship between the two countries. Despite years of building stronger economic and security ties, India and the US are now clashing amid Trump's ongoing trade war , Bloomberg reported.

2. The White House announced the new tariffs in two notices issued Monday and Tuesday, set to take effect at 12:01 a.m. in Washington (9:31 a.m. in New Delhi). This suggests that India is unlikely to receive any relief, especially as Trump's attempts to mediate the Russia-Ukraine conflict remain stalled, according to the report.

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3. The steep tariff rate puts India, the world's fastest-growing major economy, at risk of a significant decline in trade with its largest export market. These levies also jeopardise India's export competitiveness against rivals such as China and Vietnam, casting doubt on Prime Minister Narendra Modi's goals to develop the country into a major manufacturing powerhouse.

4.“This is a strategic shock that threatens India's long-standing foothold in US labour-intensive markets, risks mass unemployment in export hubs, and could weaken India's participation in global value chains,” said Ajay Srivastava, founder of New Delhi-based think tank Global Trade Research Initiative, Bloomberg reported.

5. He added that competitors stand to benefit,“potentially locking India out of key markets even after tariffs are rolled back.”

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6. India was one of the first nations to initiate trade talks with the Trump administration, but US negotiators grew frustrated with India's high tariffs and protectionist measures in sectors like agriculture and dairy. Relations worsened after Trump criticised India for buying Russian oil, accusing it of funding Vladimir Putin's war in Ukraine. In response, New Delhi defended its purchases, saying they help stabilise energy markets and that it will continue buying Russian oil“based on financial benefits.”

7. The worsening relationship has led India to distance itself from the US and strengthen connections with other BRICS nations. In recent months, Beijing and New Delhi have worked to mend their strained ties following violent border clashes in 2020. Prime Minister Modi is expected to meet President Xi Jinping next week on the sidelines of a security summit in China, his first visit there in seven years.

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8. At the same time, India and Russia have pledged to increase their annual trade by 50% to $100 billion over the next five years. New Delhi has struck a defiant tone, saying it will keep buying Russian oil as long as it's financially viable. Since the full-scale invasion of Ukraine began in 2022, India has significantly increased its oil imports from Russia and now accounts for roughly 37% of Russia's oil exports, according to Moscow-based Kasatkin Consulting, Bloomberg reported.

9. Indian companies temporarily halted their imports of Russian Urals oil in early August but have resumed purchasing in the weeks since. Meanwhile, a US trade delegation scheduled to visit India from August 25–29 for the sixth round of trade talks has postponed its trip, raising doubts about whether the two countries can secure a trade agreement by fall, a target set during Modi's visit to the White House in February. Citigroup Inc. estimates that the new 50% tariff could reduce India's annual GDP growth by 0.6 to 0.8 percentage points. However, some major industries will be exempt. Electronics exports, meaning Apple Inc.'s new factory investments in India, remain unaffected for now and will be spared, along with pharmaceutical exports, which are also excluded from the levies.

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This is a strategic shock that threatens India's long-standing foothold in US labour-intensive markets.

10. The economic fallout may be softened by the structure of India's economy, which is primarily fueled by domestic demand rather than exports. With private consumption accounting for around 60% of India's GDP, boosting consumer and business confidence remains critical for accelerating growth. While the US is India's largest export destination, receiving $87.4 billion worth of goods in 2024, those exports represent just 2% of India's total GDP.

(With inputs from Bloomberg)

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