In today's FirstScroll, we break down why the US is threatening a 100% mirror tax on Indian exports, and why an eye-for-an-eye trade logic could double the price of everything from shirts to steel.
The Story
Imagine you are Rafeeq Ahmed, the chairman of a major footwear firm called the Farida Group. Your factories churn out thousands of pairs of shoes, and roughly 65 per cent of your exports head straight to the United States.
For years, your business has relied on the predictable flow of ships crossing the ocean. You know the costs, you know the buyers, and you know the taxes. But suddenly, the math that keeps your company alive is being rewritten in Washington.
On September 18, 2026, US President Donald Trump signed the Sanctioning Russia and Iran Act. This new law gives the American president the power to slap massive duties on countries that continue to buy Russian energy.
Then came the number that sent a chill through every export hub from Chennai to Ludhiana. The law authorises tariffs of up to 100 per cent on goods coming from countries that are the top five buyers of Russian crude oil or gas.
And here is the strange part. This threat is landing just as India's merchandise exports to the US grew 6.17 per cent to hit $42.8 billion in the first five months of the current fiscal year.
So here's the question: if the US is India's largest trading partner, why is it threatening a 100% tax that could effectively double the price of Indian goods?
You see, the problem is not just about who India buys oil from. It is about a fundamental shift in how the US wants to trade, moving toward a system where every tax must be a perfect mirror.
Think of trade as a game of tennis. For decades, the US allowed the ball to be hit over the net with very low hurdles. But under the reciprocal logic, if India puts a high net on American motorcycles or apples, the US plans to raise an identical net for Indian shirts or car parts.
The US administration is using this mirror tax logic as a heavy hammer. They want to ensure that American products face the same duties in New Delhi that Indian products face in New York.
Now add the second ingredient: energy policy. The US is frustrated that India remains a top customer for Russian fuel, and they are now linking the price of Indian exports to India's Russian oil habit.
To put things in perspective, this is not the first time this heat has been turned up. Back on April 2, 2025, the US announced a combined duty of 26 per cent on Indian goods, which included a 16 per cent reciprocal tariff.
By August 2025, as a penalty for Russian oil purchases, the total tariff rose to 50 per cent. While those peaks eventually cooled after a series of legal battles and joint statements, the new law brings the threat back with double the intensity.
So who wants what here? The US administration wants to use these tariffs as a pressure tactic to force India into a lopsided trade deal or to cut ties with Moscow.
And the Indian exporters? They want stability. Men like SC Ralhan of the Federation of Indian Export Organisations warn that such high taxes would completely halt exports, as no importer can afford to pay double for engineering goods.
This is where the uncertainty becomes a silent killer. Business owners like Sharad Saraf of Technocraft Industries say they cannot make long term decisions because they do not know if their products will suddenly become twice as expensive overnight.
Now, these are trade laws in a distant capital, so why should you care? Because the US is our biggest customer, and if our engineering giants struggle to sell abroad, it hits the entire manufacturing ecosystem.
You can see how this plays out in the numbers. While sectors like smartphones and medicines are currently carved out of the heaviest duties, others are already feeling the squeeze. As of July 2026, many goods faced a 10 per cent tariff under a Section 301 probe related to labour concerns.
When you combine these baseline taxes with sectoral duties, like 50 per cent on steel and 25 per cent on auto parts, you might understand why some engineering exporters have faced losses despite growth in the past. High costs at the border eat into every rupee of profit earned on the factory floor.
But here's the twist. The law might be more about the upcoming US midterm elections in November than actual trade math. By threatening 100 per cent tariffs, the administration signals a tough stance to its voters, even if the actual implementation schedule remains a mystery.
Think tank GTRI suggests this is a move to pressure New Delhi into accepting an unequal trade agreement. They argue that India should not trade its energy security for temporary relief from these tariff threats.
The US has a history of keeping these taxes alive even after signing deals with the EU or Japan. So, even if India signs a new agreement, there is no guarantee the mirror tax won't return under a different name.
Now to be clear, the impact cannot be fully measured yet. Washington still has to announce the specific products covered and the exact rates, but the bilateral trade grew 6.5 per cent last year to $140.76 billion, showing just how much is at stake.
Some sectors have proven resilient before. For instance, the pharmaceutical sector has proven resilient because some goods are simply too essential for the US to block. Whether engineering and textiles can pull off a similar escape is the big question.
So, is the tariff threat about fair trade? Not really. It is about geopolitical leverage, energy politics, and a US administration that believes the only fair trade is a mirror image of its own rules.
India is aiming for $500 billion in bilateral trade by 2030. Whether that target survives a season of 100 per cent taxes is something only time will tell.
Until then…
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