When the full weight of the 50 percent U.S. tariff on Indian goods went into effect on Wednesday, it was 9:30 in the morning on a Hindu holiday in India. Overnight prayers for a miracle had gone unanswered.
Minutes later, Chandrima Chatterjee, the secretary general of the Confederation of Indian Textile Industry, had to ask twice whether it had actually happened. “Yesterday we were already in a state of shock,” she said. But “when there’s bad news you keep expecting something good to happen,” Ms. Chatterjee explained.
India has had less than a month to adjust to the fact that President Trump deemed it “not a good trading partner” and deserving of punishment. After months of hopeful negotiations over the details about soybeans and trade surpluses, on July 30 India found out that it was getting stuck with a 25 percent rate. A week later, the other shoe dropped: An additional 25 percent penalty would also be applied because India buys Russian crude oil.
The full weight of those tariffs took effect on Wednesday. Though China won a three-month reprieve in its tariff negotiations, a truce that lasts until November, against India, Mr. Trump did not chicken out.
On Ganesh Chaturthi, a celebration of the elephant-headed god of overcoming obstacles, the stock market in the financial capital of Mumbai was closed. But Indian market indexes lurched in anticipation on Tuesday, losing a percentage point of value in their worst performance of the summer.
The pain of steep U.S. tariffs will not be evenly distributed. Huge parts of India’s economy are disconnected from world trade, and the country’s stock market is buoyed by the savings of Indians who have nowhere better to put their money. Some products, like pharmaceuticals and smartphones, are exempt from tariffs, for now. But the parts of the economy that are affected by the U.S. levies include businesses that provide mass employment.
“At the moment, it’s a full stop” for India’s textile and garment industry, which accounts for millions of jobs and 2 percent of the country’s formal economy, according to Ms. Chatterjee. American buyers have built up inventories of fabric, shirts and pajamas in preparation for this shock, and cargo ships that dock before Sept. 17 are exempt from the crippling new taxes. But new orders have come to a halt.
“The saddest part of it is that India and the U.S., like in other things too, had worked on a very good trade relationship,” she said. “There was a perfect complementarity in our exchange. The U.S. was our biggest importer. And the U.S. had looked to India for exporting its cotton.”
Ms. Chatterjee’s organization has turned to the Indian government, led by Prime Minister Narendra Modi, for help. Like many other industry groups, hers wants money to keep idled workers on the payroll. It also wants banks to reduce the cost of loans, and it is pleading with renewed desperation for things like cheaper electricity, which could make its members more competitive against rivals in countries facing lower tariffs, like Vietnam and Bangladesh.
On Wednesday afternoon, the government announced a program, worth $28 billion over six years, to help exporters find new markets, borrow more easily and generally “insulate Indian exporters from the deleterious effects of the tariff regime,” wrote Hemant Jain, the president of a prominent Indian chamber of commerce, which had lobbied for the funding.
In addition to the prospect of distraught businesses and laid-off workers, Mr. Modi has another problem emerging on the horizon. If India is about to lose much of its $130 billion annual trade in goods with the United States — including both the cotton it buys and the bedsheets it sells — it will need to find new partners.
Like the United States, India tends to buy more than it can sell.
This will probably be on Mr. Modi’s mind as he flies to Japan on Thursday for the 15th annual India-Japan summit. Japanese companies are already major investors in India, which has a young and growing consumer market to attract them. Mr. Modi spent Tuesday talking up Japanese investment as proof of India’s ability to control its own destiny. “The money may belong to someone else, but the sweat is ours,” Mr. Modi said, speaking at a factory co-owned by Suzuki in his home state of Gujarat.
From Japan, Mr. Modi will fly straight to China, where a bigger and more challenging partnership stands in need of re-evaluation. Most Chinese investors in Indian businesses were kicked out of the country in 2020, after tensions at their Himalayan border flared into a bloody melee that killed 20 Indian soldiers.
China has the world’s largest reserve of dollars and needs to put them to work. It has spent recent years clamoring for business visas to give its investors access to Indian companies, especially start-ups. Since 2020, Mr. Modi’s government has mostly refused them, on national security grounds. After this bruising week with partners in the United States, Mr. Modi might be more amenable to his counterparts in the world’s second-largest economy.
Alex Travelli is a correspondent based in New Delhi, writing about business and economic developments in India and the rest of South Asia.
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