Retaliation Against 25% Tariffs: India Presents the US with a "700 Million Dollar Bill" at the WTO

1. Prologue──The "Automobile Tariff War" Erupts

On May 28, 2025, the Trump administration in the United States announced a presidential proclamation imposing an additional tariff of 25% on Indian-made passenger cars, light trucks, and major parts as a "supplementary measure under the U.S. Trade Expansion Act §301." In response, the Indian government formally notified the WTO Secretariat in Geneva of a "suspension of concessions" early on July 4, securing the right to impose retaliatory tariffs equivalent to approximately $725 million (7.25 billion) 30 days later.ndtvprofit.comreuters.com

2. The Content of the 25% Additional Tariff and the Logic of the WTO Notification

The U.S. justification is "the expansion of the trade deficit with India and non-tariff barriers." The applicable items include parts of HS8703/8704 (passenger cars, light trucks) and HS8708 (major parts), affecting $2.89 billion worth of Indian exports annually (based on 2024 figures). India declared the suspension of concessions by calculating "the equivalent amount of damage (725 million USD)" under Article 22.3(b) of the WTO Dispute Settlement Understanding (DSU).reuters.comreuters.com

3. The Mechanism of the "700 Million Dollar" Retaliatory Tariff

Although India's tariff proposal is not public, sources from the Ministry of Commerce suggest

• U.S.-produced almonds, pistachios, and apples (targeting influential agricultural states in the U.S.)

• large-displacement motorcycles (>800 cc)

• carbon fibers for aircraft and semiconductor manufacturing equipment
  are strong candidates. The "target tariff" method adjusts the tax rate based on import amounts to reach a total of $725 million.timesofindia.indiatimes.comreuters.com

4. India's Intentions──Exclusive Interview with Minister of Commerce Goyal

Late at night on July 4, Minister of Commerce P. Goyal stated on an NDTV program that negotiations would be based on national interest rather than deadlines, reaffirming India's stance against opening its agricultural and dairy markets. He further emphasized that "this notification is not pressure but a negotiation card," adding, "The door to an FTA is not closed, but we will not respond to unilateral demands."reuters.com

5. The U.S. Calculation──Trump's "Tough" Strategy Post-Reelection

In June, President Trump warned, "If a comprehensive agreement is not reached by July 9,a 26% tariff on all Indian imports" would be imposed. This is also an election strategy for domestic manufacturing, particularly in Rust Belt states like Michigan and Ohio. The U.S. Trade Representative (USTR) argues that "India's average tariff of 12% is unfair" and demands the elimination of tariffs on agricultural products, alcoholic beverages, and medical devices.politico.com

6. Prospects from WTO Rules and Past Precedents

The key to retaliatory tariffs is proving "equivalence." In the 2018 steel and aluminum retaliation (EU vs. US), the EU notified the WTO of tariffs amounting to 2.8 billion euros, and the U.S. could not object. India is using a similar framework this time. Meanwhile, the U.S. has recently regarded DSU panel reports as "invalid" and is strategically keeping the Appellate Body "vacant," making it a scenario wherethe WTO alone cannot resolve the issue.en.wikipedia.org

7. In India: #StandWithIndia Trends

On X, NDTV Profit's breaking news tweet was reposted 13,000 times in an hour, and the hashtag #StandWithIndia became the top trend at 11 PM (IST) on July 4. User @PolicyWonkIn applauded, saying, "Finally, Make in India has shifted from defense to offense." In contrast, the account of the parts manufacturers' association @AutoPartsVoice lamented, "Retaliation is fine, but losing the U.S. market endangers 50,000 jobs."

8. In the U.S.: #BuyAmerican and Cheers from the "Rust-Belt"

In the U.S., **#BuyAmerican** is resurfacing. The Trump support group @RustBeltPatriots in Ohio posted, "Don't let India become another China." On the other hand, the automotive industry group Alliance for Automotive Innovation appealed in a letter to Congress, stating, "The retaliation battle will raise parts prices, ultimately harming U.S. consumers."x.com

9. Industry Outcry──Parts Suppliers and Agricultural Exporters

According to the FICCI Automotive Division, there are 62 Tier-1 suppliers with an export ratio to the U.S. of over 40%, employing 380,000 people. It is estimated that if orders decrease by 10% due to retaliatory tariffs, it will push down GDP by 0.08% (according to a study by the Indian Institute of Technology Delhi). On the U.S. side, the California Almond Association declared, "58% of exports to India are at risk."reuters.comtimesofindia.indiatimes.com

10. Expert Perspectives: Three Economic Estimates

11. The Course of Negotiations──What Will Happen Before "X-Day" on July 9

From July 6 to 8, interim consultations are scheduled in Washington between USTR Representative Cutler and India's Director-General of Commerce Bayrak. The focus is on whether a "mini-deal" can be reached, including (1) phased elimination of U.S. agricultural tariffs, (2) expedited approval procedures for Indian IT/pharmaceuticals, and (3) a mutual additional tariff cap of 20%. If they fail, the scenario of an "all-out tariff war" becomes more realistic, with the U.S. imposing a 26% tariff across the board from midnight EDT on July 9, and India retaliating in early August.reuters.com

12. Ripple Effects on the Global Supply Chain

Japanese company Summit Parts, which divides production of EV wire harnesses between the U.S., Mexico, and India, has begun considering "shifting the final assembly location to Indonesia." Logistics giant DHL predicts, "The handling volume of auto parts on the Gulf-U.S. East Coast route is expected to decrease by 15% from August." This is likely to accelerateinvestment shifts to ASEAN and Mexico.reuters.com

13. Historical Context: Lessons from the 2018 Steel and Aluminum Tariffs

In the first term of the Trump administration (2018), additional tariffs on steel and aluminum were imposed, leading Canada and the EU to retaliate, and the U.S. eventually phased out the tariffs in 2021. This is a similar "chicken game," but with the new element of the WTO Appellate Body being non-functional, there is a significant risk of a prolonged stalemate without legal resolution.en.wikipedia.org

14. Conclusion──What Lies Beyond the "Hardline Card"

Retaliatory tariffs are less a negotiation card and more a weapon of **"Mutually Assured Pain."** India can project "confidence" backed by a growing domestic market, but its export-dependent parts industry cannot avoid losing competitiveness if it loses the U.S. market. The U.S. also faces a significant political effect before the election but is caught in a dilemma of undermining its strategic interest of viewing India as a counterbalance to China.
The key is "to prevent the full-scale tariffs from being implemented on July 9." Whether both countries can settle with a minimal "mini-deal" or enter a chain of retaliation, only 100 hours remain.

15. List of Sources

• NDTV Profit "India Proposes Retaliatory Duties Against US' Auto Tariffs At WTO"ndtvprofit.com

• Reuters "India