【By Observer News, Wang Yi】On August 6 local time, U.S. President Trump signed an executive order, imposing a 25% tariff on India, citing its purchase of Russian energy, directly raising the overall tariff rate from the U.S. to India to 50%.

"Trump is almost waging an economic war against India," said The New York Times that day in a sarcastic article, stating that Trump's 50% tariff effectively marks India as a "political adversary," and that the cooperation between the U.S. and India to "contain China's rise" has "already become unreliable."

The newspaper stated, "Suddenly, the crisis between India and the U.S. seems to go far beyond the trade domain." In February this year, Indian Prime Minister Modi met with Trump at the White House and stated that India aims to become one of the world's most advanced economies, viewing the U.S. as a partner. He even quoted the slogan of Trump's camp, saying, "When the U.S. and India work together, MAGA (Make America Great Again) plus MIGA (Make India Great Again) will become a 'large partnership promoting prosperity'." Trump was smiling while listening at that time.

Modi was one of the first foreign leaders to visit Washington after Trump returned to the White House, and the two often praised their friendship. The New York Times pointed out that during the meeting between Modi and Trump, China was not mentioned, but its influence remains indelible. China is not only India's regional rival, but also the U.S.'s most important economic competitor. It was originally widely expected that both sides would rely on each other to contain China. However, according to Trump's latest words and actions, "don't expect India to counter China" has become a new reality.

On February 13, 2025, U.S. President Trump hugged Indian Prime Minister Modi at a press conference. Visual China

Trump's attack on India began on July 30, when he publicly stated that India's economy was "dead." Before that, his government had been using tariffs to pressure India to lower trade barriers, without objecting to its purchase of discounted Russian oil over the past two years.

Just weeks before Trump launched a fierce attack on India, the trade negotiators of both countries and the business community still held an optimistic view about reaching an agreement. It was generally believed that both India and the U.S. were significant to each other and would not easily let global trade wars tear apart their relationship.

Although Modi was denied a visa by the U.S. in 2002 due to the anti-Muslim riots in Gujarat, India, he has been welcomed by the U.S. since he became prime minister in 2014.

The New York Times analyzed that part of the change in U.S.-India relations is based on India's role in Asian security and military cooperation. The U.S. government has long sought to attract India as a strategic partner, especially after India openly declared its nuclear arsenal, deepening the geopolitical cooperation between the two countries.

However, the report states that the core of the relationship between the two countries has always been the attractiveness of India's economy. As China's economy becomes increasingly strong, American capital has also begun to flow into India. American companies such as Apple have invested billions of dollars in India in recent years, aiming not only at the Indian domestic market but also to use it as an alternative manufacturing base for exporting goods to the U.S. and other countries. In 2023, India's population exceeded China's, becoming the world's largest population country.

The newspaper pointed out that, in the context of the U.S.-China geopolitical conflict, these investments are not only seen as profitable but also as a choice responding to the U.S. government's so-called "reducing dependence on Chinese supply chains" strategy. Multinational corporations have increased investment in India, focusing on manufacturing and professional services. In 2024, the bilateral trade volume between India and the U.S. reached approximately $130 billion, with Indian exports to the U.S. including medicines, auto parts, appliances, and gems.

However, Trump's continuous attacks on India over the past week have shaken this cooperation, causing strong reactions in the business circles of both countries. According to the executive order signed by Trump on August 6, if India continues to purchase oil from Russia, the U.S. will impose an additional 25% tariff on Indian goods starting August 27, adding to the previously announced 25%, making it one of the highest tariff rates faced by Asian countries.

The Indian Foreign Ministry responded on the same day, stating that the decision to purchase Russian oil was to "ensure the energy security of India's 1.4 billion people," and that the U.S. imposing additional tariffs on India was "extremely unfortunate," "India will take all necessary measures to protect national interests." Indian officials earlier this week revealed that they do not intend to stop purchasing Russian oil.

The New York Times said that a 25% tariff alone would be enough to severely weaken the Indian economy, and if increased to 50%, it would almost mean completely destroying its economy.

This isn't all, Trump has also turned his attention to two key industries in India that are seen as so-called "Chinese alternatives" - pharmaceuticals and semiconductors. India exports more than $10 billion worth of medicines to the U.S. every year, producing nearly 40% of the U.S.'s generic drugs. Trump announced that he would impose tariffs on the pharmaceutical industry and gradually increase the tax rate, which could eventually reach 250%.

On the 6th, he also stated that he would impose tariffs of about 100% on chips and semiconductors, but not on companies that build factories in the U.S. This will directly impact chip companies that have invested in India. In 2023, U.S. Micron Technology announced an investment of over $2 billion in a chip factory in Gujarat, Modi's hometown, using Indian government subsidies. Stephen Schwarzman, chairman and CEO of U.S. Blackstone Group, said this year that he would invest $11 billion in building data centers in India to support global artificial intelligence development.

A anonymous Mumbai investor pointed out that these multinational investments are not just about money flow, but about the commercial future between India, China, and the U.S., transferring technical expertise from one economy to another. "India is benefiting from this, but now it seems to have become a vulnerability," he said.

"The breakdown of U.S.-India relations brings great uncertainty. Who would bet on the next big investment?" The New York Times explicitly stated, although there has been no massive withdrawal of U.S. capital yet, many investors remember that after the 2020 Sino-Indian border conflict, Chinese companies were forced to exit the Indian market at a loss overnight. "Even if the tariff war is different, cooperation between India and the U.S. around China is already nothing to rely on," the newspaper said.

This article is an exclusive piece by Observer News, and any reproduction without permission is prohibited.

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