Last-minute miracle may be sole saviour as Trump penalty looms closer

Two days before the US’s penalty tariff of 25 per cent – over and above the 25 per cent reciprocal tariff – kicks in, there are few signs of reprieve, barring a last-minute miracle.

Both sides have seemingly hardened their positions on India’s import of Russian oil, although External Affairs Minister S Jaishankar has assured that “the lines are not cut, people are talking to each other and we will see where that goes”.

More funds for lobbying

News from Washington suggests that India has hired a new firm to lobby with the US administration. According to the recent filings with the US Department of Justice, the Indian Embassy in Washington signed a contract with former senator David Vitter-led Mercury Public Affairs to intensify its diplomatic efforts.

Reports say this is a short-term contract, from August 15 to November 15, 2025, for which India will be paying $75,000 per month.

Also read: Has Trump hinted at delaying retaliatory tariffs on India?

This is apart from the two other lobbying firms India has engaged for years – $1.8 million annual contract with SHW Partners LLC led by former Trump adviser Jason Miller, and $50,000 monthly contract with the BGR Associates.

Trump refuses to step back

Having fielded his hawkish trade advisor, Peter Navarro, to target India for buying Russian oil, US President Donald Trump nominated his close confidant Sergio Gor as the next ambassador to India last Saturday. His Truth Social post left nothing to imagination about the drift: “For the most populous Region in the World, it is important that I have someone I can fully trust to deliver on my Agenda and help us, MAKE AMERICA GREAT AGAIN.”

India is yet to react to Gor’s nomination. His appointment will wait until the US Senate approves it. He will continue as the director of the White House Presidential Personnel Office until then. His new task would include a special envoy for South and Central Asian affairs.

Watch: Trump's tariff tirade: Can India weather the storm? | Talking Sense With Srini

On Sunday (August 24), US Vice President JD Vance also made it clear that the US wouldn’t be changing its position in a hurry. While talking to reporters in Washington, Vance said Trump “applied aggressive economic leverage”, the 25 per cent secondary tariffs on India, “to try to make it harder for the Russians to get rich from their oil economy”. Since the stalemate over the Russian war with Ukraine continues, the penalty tariffs would stay for now.

India hardens stance

India too has hardened its stance on not opening up agriculture and dairy as a sop for the US to reduce its reciprocal tariff or stop buying Russian oil to avoid the penalty tariff.

Prime Minister Narendra Modi has vowed to protect farmers, fishermen, and cattle rearers and counter the adverse impact with a push to the domestic industry towards self-reliance by manufacturing fertilizers, jet engines, EV batteries etc on the one hand, and to reduce the GST burden to leave more money in the hands of people on the other.

Jaishankar has taken to defending India’s Russian oil imports.

Also read: How will US tariff hit rupee, foreign investment and the common Indian?

On Sunday evening, he flagged the “inconsistencies” between the US and the EU again at a business event, pointing out that China was the largest importer of Russian oil and the European nations the largest importer of Russian LNG.

He also questioned both the US and the EU why they kept buying India’s refined oil products that used Russian oil: “If you have a problem buying oil or refined products from India, don’t buy it. Nobody forces you to buy it. Europe buys, America buys, so you don’t like it, don’t buy it.”

Exporters in a bind

Tariffed out, Indian exporters have no option but to wait for the Centre to offer relief. In fact, an exporter put forward the Centre’s assurance to them of Rs 25,000 crore relief packages – ‘Niryat Protsahan’ scheme of Rs 10,000 plus crore and ‘Niryat Disha’ scheme of Rs 14,500 plus crore.

As per the Centre’s reply to the Lok Sabha last week, the 50 per cent US tariff would adversely impact around $48.2 billion of Indian goods exports to the US or 55 per cent of $87.34 billion exports in 2024. Many of India’s high-tech export items like electronics, pharmaceuticals, refined petroleum products etc., are on the US’s “exempted” list.

Also read: US tariffs on India are aimed at gaining 'economic leverage' against Russia, says JD Vance

The biggest losers are job-intensive sectors like textile, gems and jewellery, leather and footwear. While orders stopped even before the 25 per cent reciprocal tariff came into effect on August 7, these exporters do have a transition period for their shipped goods to reach the US by September 17.

The net impact on exports will be known in October. The impact of forward booking that intensified months ahead of the 25 per cent reciprocal tariff is not known. The Commerce and Industry Ministry doesn’t provide disaggregated data. Its latest data show, total goods exports (to all countries) increased from $34.7 billion in July 2024 to $37.24 billion (7.3 per cent growth) and from $144.76 billion during April-July 2024 to $149.2 billion in the corresponding period of 2025 (3 per cent growth).

Diversification of exports isn’t as easy it sounds, at least not in the short run.

Recalibration not an easy option

Traders face a major challenge in exporting to European and other non-US developed nations because of their stricter quality standards, auditing norms, disclosures relating to energy sources (carbon emission) and labour standards in manufacturing.

Perhaps in a first for an official, Commerce Secretary Sunil Barthwal last week highlighted how FTAs were getting more complex with inclusions of non-trade regulatory matters involving labour, environment, intellectual property rights (IPR), and government procurements.

Also read: Nikki Haley asks India to take Trump's concerns on Russian oil 'seriously'

For the Parliament Standing Committee on Finance to recommend, in its report tabled in the Parliament on August 19, 2025, “recalibration of India’s export strategy” with enhanced focus on manufacturing competitiveness and greater diversification of market may sound good on paper but not a solution to the current tariff logjam – the context in which it was made.