The US-India trade talks broke down, and the 50% tariff war ignited the competition between the two countries

Just last week, the US trade negotiation team suddenly cancelled the plan to visit India from August 25th to 29th, marking the failure of this crucial negotiation that India had high hopes for. For the Modi government, the worst news is that it is a certainty that the United States will impose punitive tariffs of up to 50% on Indian goods on August 27. This tax rate is one of the highest among all the trading partners of the United States and will deal a heavy blow to India's market with an annual export volume of up to 86.5 billion US dollars to the United States.

This negotiation was originally the last chance to avoid high tariffs. The United States and India have held five rounds of negotiations before, but the agreement has been delayed due to India's refusal to open its huge market for agricultural products and dairy products and its unwillingness to stop purchasing Russian oil. The US Embassy in New Delhi said that the trade and tariff negotiations are handled by the Office of the United States Trade Representative (USTR), and no more details can be disclosed at present. Indian officials privately disclosed: "The US side will not attend the meeting on the 25th. As for whether the negotiations will be permanently suspended or temporarily halted, it is completely unclear at present."

The tariff stick that the Trump administration has swung at India this time seems to be a trade issue on the surface, but in fact, it is aimed at India's continuous reliance on Russian energy. The US side has made no attempt to hide its definition of a 50% punitive tariff as a "punishment" for India's purchase of Russian crude oil. Data shows that India has become one of the largest buyers of Russian crude oil, with its import volume soaring from less than 3% before the conflict to over 40%. This kind of balanced diplomacy once enabled India to obtain cheap energy and economic benefits. Experts from the Center for Strategic and International Studies in the United States pointed out: "India is trying to walk a tightrope between the United States and Russia, but geopolitics is not a tightrope show - ultimately you have to take sides."

Apart from the energy issue, market access for agriculture is another difficulty in the US-India trade negotiations. The United States has been seeking greater market access in sensitive areas such as agriculture and dairy products in India. Agriculture is of vital importance to India, accounting for the livelihoods of approximately 60% of the population. It is a "politically sensitive area" for the Modi government. Modi has made it clear that "he will not compromise on the well-being of farmers and the dairy industry." The Indian government pointed out that the United States and the European Union themselves have been continuously trading with Russia, but they have separately imposed punitive tariffs on India. This approach is unfair, unjust and unreasonable.

The impact of the 50% tariff on the Indian economy has begun to emerge. India's largest shoe manufacturer, Farida Group, has frozen its new factory investment of 10 billion rupees in response to US tariffs, and its export orders have also come to a complete standstill. The chairman of the Indian Steel Association, Upadia, said, "Almost all the orders from the United States have been cancelled." The production progress has slowed down and a large amount of goods are piling up. Pillar industries such as textiles, jewelry and machinery are the first to be affected. To deal with the crisis, India announced that it would suspend cotton import tariffs from August 19th to September 30th to relieve the pressure on the textile industry. The Modi government also plans to carry out a reform of the Goods and Services tax, reducing the four tax brackets into two (5% and 18%) to boost the economy in response to the impact of tariffs.

The trade deadlock between the United States and India profoundly reveals the pain of reshaping the global trade system. When the United States replaces multilateral rules with "value trade" and weaponizes economic sanctions, even emerging powers of considerable size like India cannot escape being swept along. This crisis has served as a wake-up call for all countries that are attempting to walk a tightrope in the game among major powers. As the world accelerates its division into different economic camps, the so-called "strategic autonomy" space is being sharply compressed. Brazilian geopolitical expert Pedro Castro pointed out: "The tariff policies of the Trump administration are forcing every country to reconsider its economic alliance." We are witnessing the disintegration of the globalized trading system, which is being replaced by regional trading blocs.

Bloomberg Economics' model shows that if the 50% tariff policy continues to be implemented, India's exports to the United States could shrink by 60%, which would directly threaten nearly 1% of India's GDP. The Indian stock market unexpectedly rebounded by 1.6% before the tariffs took effect, with the market expecting Modi's tax reform plan to ease the impact. The US Embassy in New Delhi said that the two sides "remain in contact", but the new schedule for negotiations is still pending. When the United States punishes a sovereign state's energy choices with a 50% tariff, the rules of world trade have been rewritten.