By Ramesh Bhan
New Delhi, Jan 12 (UNI) The threat of imposing a 500 per cent Tariff on India by the US, aimed at paralysing the growing Indian economy, can spur the Swadeshi and Atmnirbhar (self reliant) Bharat campaigns and, in an inter-dependent world, have a retaliatory impact on the US market as well.
The potential 500 per cent tariff on India, part of a proposed US bill, can be interpreted as a virtual trade embargo, making Indian goods commercially unviable in the US market and could lead to job losses in India. For the US, it would result in higher prices and supply chain disruptions for businesses that rely on Indian imports.
India has already been subject to a cumulative 50 per cent tariff on most goods since August 2025 because of its Russian oil purchases. But a 500 per cent tariff would represent a punitive measure rather than a standard trade policy tool.
A 500 per cent tariff would effectively halt Indian exports to the US, impacting key sectors like textiles, gems and jewellery, leather, and auto parts. Labour-intensive industries, particularly small and medium enterprises (MSMEs) will also be impacted. Weaker exports could affect manufacturing output. Geo-politically, the move would strain the broader India-US strategic partnership, pushing India to further diversify its trade partners and reinforce ties with other groupings.
The US move should be a trigger for India to strengthen BRICS and the Russia-India-China (RIC) forum.
However, India seems to have taken the announcement of 500 per cent tariff with a pinch of salt and has given a measured response. This is because of many factors, including India’s domestic market strength. India’s domestic demand provides a significant cushion against external shocks. Strengthening the local and rural economy can effectively mitigate the impact of such tariffs. India has consistently defended the oil trade with Russia in its national interest.
Following the imposition of 50 per cent tariffs, India has been actively pursuing trade deals with other partners, such as the EU and Mercosur bloc, and promoting ‘Atmnirbharta’ (self-reliance) to reduce dependence on the US.
The US, too, would face a negative impact. US consumers would face substantial price hikes on everyday products imported from India. US importers would be forced to seek alternative sourcing partners, disrupting existing supply chains and increasing operational costs. US businesses relying on Indian imports would face higher costs, and exporters from other countries like Vietnam and Bangladesh would benefit.
There is also a possibility of the imposition of retaliatory measures by India, which has the potential to damage the long-term diplomatic and strategic relationship. The India-US strategic relationship is vital for countering China’s influence in the Indo-Pacific. Overall, the unilateral use of high tariffs undermines multilateral trade arrangements.
This is not the first time that the US has tried to pressure India on several issues, including geopolitical alignments, trade and nuclear tests. There have been several instances of pressure, and sanctions by the United States against India between 1965 and the recent tariff warnings.
During the Bangladesh Liberation War in 1971, the U.S. under President Richard Nixon supported Pakistan and sent the nuclear-armed Seventh Fleet to the Bay of Bengal. The US action was seen as a warning to India. In 1974, the U.S. imposed sanctions, including export controls and the suspension of nuclear cooperation, after India’s first nuclear test, ‘Smiling Buddha’ at Pokhran.
In 1998, following India’s Pokhran-II nuclear tests, President Bill Clinton imposed extensive economic and military sanctions under the Glenn Amendment. These sanctions, which included cutting off most aid and blocking defence technology exports, were the most severe.
Even before the recent 500 per cent tariff warnings, trade tensions were going on between the two countries.
India’s purchase of the Russian S-400 missile system in 2018 raised the possibility of U.S. sanctions under the Countering America’s Adversaries Through Sanctions Act (CAATSA), though an India-specific waiver was eventually approved by the US House in 2022.
In 1965, India faced a severe food crisis because of droughts and wars with China in 1962 and Pakistan in 1965. India was highly dependent on food imports then, particularly wheat from the U.S. under the infamous PL-480 Food for Peace programme. The PL-480 was the then-US President Lyndon Johnson’s use of food aid as a geopolitical bargaining chip.
Johnson was not happy with India’s non-aligned stance and criticism of the US bombing in Vietnam. He delayed PL-480 shipments, creating a food shortage in India and exacerbating the crisis. The US made the food aid conditional on India implementing specific agricultural reforms. The quality of some imported grain was very poor, which, combined with political pressure, was widely perceived as an ‘insult’ to the nation.
This ‘insult’ reinforced India’s determination to achieve food security and start the Green Revolution. This humiliation served as a major catalyst for India to aggressively pursue the Green Revolution under the then Prime Minister Lal Bahadur Shastri and later Indira Gandhi. Noted agricultural scientist Dr M.S. Swaminathan was given the responsibility for ushering in the Green Revolution, which is bearing fruit even today and turned India into a food-surplus State within a few decades.
Following India’s nuclear tests in May 1998 (Pokhran-II), the US, under President Bill Clinton, imposed sanctions on India under the Glenn Amendment. The sanctions included the suspension of most US foreign aid, with exceptions for humanitarian assistance and food/agricultural commodities, the termination of all defence sales, military financing, and licenses for the export of items on the US Munitions List.
Denial of any U.S. government credits and credit guarantees, or financial assistance from international financial institutions like the World Bank and IMF, and prohibiting US banks from extending loans or credit to India were some of the measures taken by the US against India. More than 200 Indian entities, including government research bodies and academic institutions linked to the nuclear programme, were blacklisted.
While the sanctions had some effect on foreign investor confidence and capital flows, their direct economic impact was cushioned by India’s sufficient foreign reserves at the time.
The sanctions were eased within a year and fully lifted by the George W. Bush administration in the wake of the 9/11 attacks, leading to a major strategic partnership shift between the two nations.
In the early 1990s, the US blocked a deal that would have transferred cryogenic engine technology to India for space programmes. However, this denial became a major impetus for India’s self-reliance. Indian Space Research Organisation (ISRO) fast-tracked the indigenous development of the cryogenic engine. This culminated in the successful maiden launch of a Geosynchronous Satellite Launch Vehicle (GSLV) powered by a fully indigenous cryogenic engine in January 2014.
India has a history of converting setbacks into advantages. The ushering in of the Green Revolution, the development of the cryogenic engine and India’s space programme and India’s nuclear status prove beyond doubt India’s resilience and comeback after every punitive measure. Ironically, the same indigenous cryogenic engine technology was used to launch the NASA-ISRO Synthetic Aperture Radar (NISAR) satellite on July 30, 2025, from the Satish Dhawan Space Centre in Sriharikota. The mission is a collaboration between ISRO and NASA.
The 500 per cent tariff is also expected to spur the Swadeshi and Atmanirbhar Bharat campaigns.
