The story so far: Last week, the U.S. accused India of violating what it considers fair trade practices. The White House published a report titled ‘The Great Transhipment Scam’ in which it accused about 40 countries, including India, of helping China evade U.S. tariffs.

What is the Great Transhipment Scam?

Over the last nearly three decades, the U.S. and Chinese economies have become deeply intertwined, with the U.S. increasingly relying on China to be its manufacturing hub, and China relying on the U.S. as its market and for investment. This is a somewhat simplistic assessment of their engagement, but it is also the most relevant for the current context. 

This relationship has resulted in the U.S. running huge trade deficits with China. That is, importing much more from the country than it exports to it. U.S. President Donald Trump has long spoken about his concerns about vast trade deficits; this is primarily why he insisted on levying tariffs on U.S. trade partners during his second term. 

However, China began facing such actions during Mr. Trump’s first term itself. In 2018, the U.S. imposed tariffs ranging from 7.5% to 100% on goods from China such as electric vehicles, semiconductors, and medical products under Section 301 of the Trade Act of 1974, for unfair trade and tech practices. As per the White House report, this resulted in a shrinking of the U.S.’s trade deficit with China in 2019 and 2020.

On July 24, 2026, the U.S. added a further 12.5% tariff for gaps in forced-labour compliance and the lack of comprehensive legal import prohibitions. 

According to the report, since 2018, Chinese exporters have increasingly been routing goods through third countries to evade tariffs. “Products that previously moved directly from China to the United States were shipped through jurisdictions where limited assembly, finishing, repackaging, relabeling, or documentation changes could create the appearance of a different national origin,” the report stated.

What is India’s involvement?

The White House has identified more than 40 countries associated with “elevated illegal transhipment risk”, with India among the top “enablers” of China’s evasion of tariffs. The other countries/regions named as the top enablers are Mexico, Canada, the European Union, Japan, and South Korea.

The U.S. has alleged that these countries are importing Chinese goods, modifying them marginally, and exporting them to the U.S. at tariffs below what these goods would have faced had they directly been exported from China. This, the report said, has led to significant revenue loss for the U.S. government. 

“The Office of Trade and Economic Analysis estimates that approximately $67 billion in U.S.-bound goods were transshipped from China through the top hubs — Mexico, India, and Vietnam — in 2025, producing an estimated $28 billion in lost tariff revenue,” the report said.

As an example, the report mentioned the Pune-Gujarat-Chennai production belt, saying that the region “absorbs” pumps and compressors from China, thereby affecting industrial supply chains in Cincinnati, Dayton, and Columbus in the U.S.

What does this mean for the U.S.?

Broadly, the report’s findings suggest that the U.S.’s tariff policy has failed to reduce U.S. imports and increase domestic production. While U.S. imports from China fell from $525.8 billion in 2017 to $327.5 billion in 2025, total U.S. imports from all countries rose sharply from $2.41 trillion to $3.50 trillion. In short, the U.S. replaced many Chinese finished goods with imports from other countries rather than with domestically produced goods. 

As Ajay Srivastava, founder of the think tank Global Trade Research Initiative, said, “Mr. Trump’s tariffs changed the source of imports but failed to reduce America’s overall dependence on imported goods”.

What are the implications for India?

This is yet another way that the U.S. is finding fault with India’s trade policies. During his first term, Mr. Trump found fault with India’s tariffs on luxury motorcycles, after which India reduced them. 

Last year, he blamed India for financing Russia’s war with Ukraine by importing Russian oil; his government hiked tariffs on imports from India to 50% as a penalty. 

More recently, the U.S. Senate passed a Bill with Mr. Trump’s backing that would result in tariffs of up to 100% being levied on India for its Russian oil imports. The Bill is waiting to be introduced and passed in the House of Representatives.

Apart from this, the U.S. has also imposed a 10% tariff on imports from India as a penalty for not doing enough to curb the import of goods made using forced labour. Another investigation on excess capacity is ongoing, which could potentially see tariffs being hiked even further.

The latest allegations that India is helping China evade tariffs are not accompanied by penal actions yet, but that possibility remains. Mr. Trump could decide to impose further tariffs on countries he deems are helping China in this regard. 

How could India’s economy be impacted?

For India, any penal action would be a blow to its growth story. Over the last few years, rather than predominantly importing Chinese finished goods, India has been importing raw materials and intermediate goods, using them to manufacture finished goods within the country, and then exporting them. 

For example, electronic components made up 3.3% of India’s imports from China in the first quarter of 2015-16. This has grown to nearly 13% as of the first quarter of 2026-27. Several other goods used in manufacturing in India, such as electric machinery, chemicals, plastics, have seen their shares rise over the same period.

On the other hand, the share of finished goods such as telecom instruments have fallen from about 18% to 11% over the same period of time. Similarly, the share of manufactured fertilisers have fallen from about 7.5% in 2015 to less than 1% in 2026. The share of consumer electronics in imports from China have halved over the same period. 

The ‘Make in India, For the World’ story still relies heavily on inputs from China. If India is forced to curb those imports, its manufacturing costs will rise, making Indian products less competitive globally.

Published – August 23, 2026 01:39 am IST

The story so far: Last week, the U.S. accused India of violating what it considers fair trade practices. The White House published a report titled ‘The Great Transhipment Scam’ in which it accused about 40 countries, including India, of helping China evade U.S. tariffs.

What is the Great Transhipment Scam?

Over the last nearly three decades, the U.S. and Chinese economies have become deeply intertwined, with the U.S. increasingly relying on China to be its manufacturing hub, and China relying on the U.S. as its market and for investment. This is a somewhat simplistic assessment of their engagement, but it is also the most relevant for the current context. 

This relationship has resulted in the U.S. running huge trade deficits with China. That is, importing much more from the country than it exports to it. U.S. President Donald Trump has long spoken about his concerns about vast trade deficits; this is primarily why he insisted on levying tariffs on U.S. trade partners during his second term. 

However, China began facing such actions during Mr. Trump’s first term itself. In 2018, the U.S. imposed tariffs ranging from 7.5% to 100% on goods from China such as electric vehicles, semiconductors, and medical products under Section 301 of the Trade Act of 1974, for unfair trade and tech practices. As per the White House report, this resulted in a shrinking of the U.S.’s trade deficit with China in 2019 and 2020.

On July 24, 2026, the U.S. added a further 12.5% tariff for gaps in forced-labour compliance and the lack of comprehensive legal import prohibitions. 

According to the report, since 2018, Chinese exporters have increasingly been routing goods through third countries to evade tariffs. “Products that previously moved directly from China to the United States were shipped through jurisdictions where limited assembly, finishing, repackaging, relabeling, or documentation changes could create the appearance of a different national origin,” the report stated.

What is India’s involvement?

The White House has identified more than 40 countries associated with “elevated illegal transhipment risk”, with India among the top “enablers” of China’s evasion of tariffs. The other countries/regions named as the top enablers are Mexico, Canada, the European Union, Japan, and South Korea.

The U.S. has alleged that these countries are importing Chinese goods, modifying them marginally, and exporting them to the U.S. at tariffs below what these goods would have faced had they directly been exported from China. This, the report said, has led to significant revenue loss for the U.S. government. 

“The Office of Trade and Economic Analysis estimates that approximately $67 billion in U.S.-bound goods were transshipped from China through the top hubs — Mexico, India, and Vietnam — in 2025, producing an estimated $28 billion in lost tariff revenue,” the report said.

As an example, the report mentioned the Pune-Gujarat-Chennai production belt, saying that the region “absorbs” pumps and compressors from China, thereby affecting industrial supply chains in Cincinnati, Dayton, and Columbus in the U.S.

What does this mean for the U.S.?

Broadly, the report’s findings suggest that the U.S.’s tariff policy has failed to reduce U.S. imports and increase domestic production. While U.S. imports from China fell from $525.8 billion in 2017 to $327.5 billion in 2025, total U.S. imports from all countries rose sharply from $2.41 trillion to $3.50 trillion. In short, the U.S. replaced many Chinese finished goods with imports from other countries rather than with domestically produced goods. 

As Ajay Srivastava, founder of the think tank Global Trade Research Initiative, said, “Mr. Trump’s tariffs changed the source of imports but failed to reduce America’s overall dependence on imported goods”.

What are the implications for India?

This is yet another way that the U.S. is finding fault with India’s trade policies. During his first term, Mr. Trump found fault with India’s tariffs on luxury motorcycles, after which India reduced them. 

Last year, he blamed India for financing Russia’s war with Ukraine by importing Russian oil; his government hiked tariffs on imports from India to 50% as a penalty. 

More recently, the U.S. Senate passed a Bill with Mr. Trump’s backing that would result in tariffs of up to 100% being levied on India for its Russian oil imports. The Bill is waiting to be introduced and passed in the House of Representatives.

Apart from this, the U.S. has also imposed a 10% tariff on imports from India as a penalty for not doing enough to curb the import of goods made using forced labour. Another investigation on excess capacity is ongoing, which could potentially see tariffs being hiked even further.

The latest allegations that India is helping China evade tariffs are not accompanied by penal actions yet, but that possibility remains. Mr. Trump could decide to impose further tariffs on countries he deems are helping China in this regard. 

How could India’s economy be impacted?

For India, any penal action would be a blow to its growth story. Over the last few years, rather than predominantly importing Chinese finished goods, India has been importing raw materials and intermediate goods, using them to manufacture finished goods within the country, and then exporting them. 

For example, electronic components made up 3.3% of India’s imports from China in the first quarter of 2015-16. This has grown to nearly 13% as of the first quarter of 2026-27. Several other goods used in manufacturing in India, such as electric machinery, chemicals, plastics, have seen their shares rise over the same period.

On the other hand, the share of finished goods such as telecom instruments have fallen from about 18% to 11% over the same period of time. Similarly, the share of manufactured fertilisers have fallen from about 7.5% in 2015 to less than 1% in 2026. The share of consumer electronics in imports from China have halved over the same period. 

The ‘Make in India, For the World’ story still relies heavily on inputs from China. If India is forced to curb those imports, its manufacturing costs will rise, making Indian products less competitive globally.

Published – August 23, 2026 01:39 am IST

The Hindu has learnt from various export promotion bodies that the liquidity crunch is a major concern for exporters as they have already bought the stock that they would have exported to the U.S. under normal circumstances. 
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The imposition of 50% tariffs (25% reciprocal plus 25% penalty) by the U.S. on gem and jewellery is expected to lead to a revenue fall of India’s natural diamond polishing industry by a steep 28-30% to $12.50 billion this fiscal, compared with $16 billion last fiscal, CRISIL Ratings said in a note. 

The blow will follow a 40% degrowth over the past three fiscals because of a fall in both prices and sales volume of natural diamonds as demand in the U.S. and China dropped, and competition from lab-grown diamonds rose, it said.

The 50% tariffs, effective this week, makes exports to the U.S. tough for two reasons: one, the industry’s low margins make absorption of the incremental levy very difficult and two, declining demand means passing on the incremental burden to consumers will not be easy, it said.

The consequent reduced operating leverage could erode the operating margin of diamond polishers by 50-100 basis points and pressurise their credit profiles, it added.

“Our analysis of 43 diamond polishers, accounting for nearly a fourth of the industry’s revenues, indicates as much,” the rating agency said.

The Indian polished diamond industry derives 80% of its revenues from exports while the U.S. is a key market for India and accounted for as much as 35% of its exports. 

Sales had begun getting impacted after a 10% tariff was imposed in April 2025. Hence, the share of the US in India’s polished natural diamonds slid 1100 basis points in the first four months of this fiscal to 24%, CRISIL said.

But in a proactive move, diamond polishers had cranked up production in July and August to meet the anticipated festival demand in the US. 

“Not surprisingly, exports surged 18% in July on-year. And competition from lab-grown diamonds in markets such as the US will continue to dent revenues, with the variety having already captured ~60% of the market share by volume. Subdued Chinese demand adds to these woes,” the rating agency said.

Rahul Guha, Senior Director, CRISIL Ratings, said, “The upshot is that revenues for the domestic industry, which polishes 95% of all diamonds produced in the world, is set to drop to its lowest since 2007.”

“To be sure, consumption in India has been increasing sequentially over the years, but the incremental demand doesn’t have the heft to fully offset the losses in the U.S. and China. Additionally, while the UAE has emerged as a dominant hub for India’s exports with its share doubling to ~20%, on year, the risks of a substantial downturn in revenues are high,” he said.

The industry’s ability to navigate the market dynamics, including tariffs, is crucial to its future. Diamond polishers can take three steps: increase domestic sales; push sales in alternative geographies; and set up polishing facilities in trading hubs as rerouting via low-tariff nations is not an option, he said. 

Even if retailers explore alternative sourcing options in lower-tariff countries such as the UAE or Belgium, a significant portion of the diamonds would still be polished in India and thus subject to higher tariff, he added.

And given the falling demand, US retailers are unlikely to absorb the tariff cost. Hence, operating margins of diamond polishers would decline to 3.5-4.0% after dropping 100 bps in the past three fiscals from a peak of 5.5% in fiscal 2023.

Diamond polishers are expected to keep a lean inventory to control debt. Miners have cut production to limit the fall in prices, in line with subdued demand. Timely collection from customers abroad will be monitorable amid slowing demand. Debt levels of diamond polishers should reduce over the medium term.

Himank Sharma, Director, CRISIL Ratings said, “While limited reliance on external debt has helped diamond polishers maintain a stable capital structure, declining scale of operations and pressure on profitability will likely test their credit risk profiles. Specifically, while the financial leverage1 is expected to be relatively stable at 0.7-0.8 time, the interest coverage could decline to 2 times from 2.3-2.5 times last fiscal.”

In the road ahead, demand for natural diamonds in key markets will need close monitoring, given the tariff landscape and geopolitical uncertainties, CRISIL said. 

Published – August 28, 2025 03:40 pm IST

The additional 25% tariff imposed by U.S. President Donald Trump on India for its purchases of Russian oil came into effect Wednesday (August 27, 2025), bringing the total amount of levies imposed on New Delhi to 50 per cent.

The Department of Homeland Security (DHS), in a draft order published on Monday (August 25, 2025), said the increased levies would hit Indian products that are “entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on August 27, 2025”.

Also read: Be vocal for local and Swadeshi should be your life’s mantra, PM urges Indians

Mr. Trump had announced reciprocal tariffs of 25% on India that came into effect on August 7, when tariffs on about 70 other nations also kicked in.

On August 7, the U.S. President announced doubling tariffs on Indian goods to 50% for India’s purchases of Russian crude oil, but gave a 21-day window to negotiate an agreement.

On Monday (August 25, 2025), Prime Minister Narendra Modi asserted he can’t compromise on the interests of farmers, cattle-rearers, small-scale industries, cautioning “pressure on us may increase, but we will bear it”.

Also read: Trump’s 50% tariffs on Indian goods take effect | highlights

“Products of India, except those set forth in section 3 of Executive Order 14329, that are entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on August 27, 2025, will be subject to the additional ad valorem rate of duty,” the DHS order read.

However, Indian products will be exempt from the new 50% tariff if they were “already loaded on a ship and in transit to the U.S. before 12:01 am (EDT) on August 27, 2025, provided they are cleared for use in the country or taken out of a warehouse for consumption before 12:01 am (EDT) on September 17, 2025, and the importer certifies this to U.S. Customs by declaring the special code HTSUS 9903.01.85”.

Commenting on the additional tariffs on India, Mark Linscott, Senior Advisor with Washington, D.C.-based business consulting and advisory firm The Asia Group, said that “unfortunately”, the U.S. and India have managed to convert what appeared to be a true and unprecedented win-win on trade into a “remarkable lose-lose”.

“For the moment, the trade talks on reciprocal tariffs are on thin ice while the two sides stew over how to reach an understanding on Russian oil purchases. Hopefully, cooler heads who understand the value of the relationship will prevail in finding the path forward,” Mr. Linscott said.

Partner at The Asia Group Nisha Biswal said the 50% tariffs on India — now the highest of any U.S. trading partner — will be hugely disruptive, pricing Indian textiles and garments out of the U.S. market.

“U.S. businesses have also lost the unprecedentedly low tariff rates that USTR (United States Trade Representative) had previously negotiated. The move also casts doubt on the China+1 strategy, creating uncertainty for companies that had shifted production to India,” she said.

“The short-term impact of these tariffs will be undoubtedly severe, but a path forward remains possible if Modi and Trump engage directly to restore trust and strike a workable agreement,” Ms. Biswal added.

Managing Principal at The Asia Group Basant Sanghera said the secondary tariffs will be highly damaging to U.S.-India economic ties and India’s manufacturing ambitions.

“Without some level of leader-level engagement, the trade relationship will remain in the doldrums, with risk of further damage,” he said.

U.S. Treasury Secretary Scott Bessent has accused India of “profiteering” by reselling Russian oil. India has called the tariffs imposed by the U.S. “unjustified and unreasonable”.

Published – August 27, 2025 11:42 am IST

India is planning dedicated outreach programmes in 40 countries, including the UK, Japan, and South Korea, to push textiles exports amid a 50% tariff imposed by the U.S. on Indian products, an official said on Wednesday.

Other nations include Germany, France, Italy, Spain, the Netherlands, Poland, Canada, Mexico, Russia, Belgium, Turkiye, the United Arab Emirates, and Australia.

“In each of these 40 markets, this is proposed to pursue a targeted approach, positioning itself as a reliable supplier of quality, sustainable, and innovative textile products with the lead role of the Indian industry, including EPCs and Indian Missions in these countries,” the official said.

India already exports to over 220 countries, but the 40 importing countries hold the real key to diversification.

Together, these 40 countries represent more than $590 billion in textile and apparel imports, offering vast opportunities for India to enhance its market share, which currently stands at only around 5-6%, the official said.

-PTI

Lovely Professional University in Punjab’s Jalandhar.
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A man walks past a screen displaying U.S. President Donald Trump, at the Bombay Stock Exchange (BSE).
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