Trade relations between the United States (US) and India reached a critical point when US President Donald Trump announced an additional 25% tariff on goods imported from India, which will take effect within 21 days from the date of announcement.
The punitive measure is linked to India's refusal to stop oil imports from Russia, and will increase the tax rate on some of India's key exports to 50%, among the highest ever imposed on Washington's major trading partner.
India's Foreign Ministry described the decision as "deeply regrettable" and stressed that oil purchases from Russia are driven by the energy needs of its 1.4 billion people, while warning that the country will take all necessary measures to protect national interests.
The new tariffs are expected to have a major impact on India's key exports to the US market, including textiles, jewellery, footwear and gems, which account for nearly $87 billion in trade by 2024.
In a press conference, Trump also confirmed that similar measures could be imposed on China, which also imports oil from Russia.
According to analysts, Trump's decision marks the most serious deterioration in bilateral relations between the US and India since he returned to office in January.
The tensions also have the potential to trigger a change in geopolitical alliances, especially as Indian Prime Minister Narendra Modi is scheduled to make his first official visit to China in seven years.
In a related development, India's export sector is now at risk of losing competitiveness compared to regional competitors such as Vietnam and Bangladesh.
As a result, India's Gross Domestic Product (GDP) growth is expected to be affected, with analysts predicting that it may shrink below 6% this year.
