US tariffs, digital tax and the shifting ground: What channel partners need to know

The trade landscape is changing. The United States is considering tariffs on Indian goods, while India is reintroducing its digital tax, targeting American tech companies for billions. Meanwhile, Western nations criticise India for buying Russian oil, even as they continue their own trade with Moscow.

For the Indian IT and channel partner community, these developments are more than just policy news. They could change how business operates in the coming years.  

When US tariffs meet digital tax  

At first glance, tariffs and the Digital Tax may seem like distant diplomatic tools. However, their effects will be felt directly in the business districts of Nehru Place, Bengaluru, Hyderabad, and other IT hubs.  

Mahendra Agrawal, President of the All Delhi Computer Traders Association, said, “Many American businesses operate without paying any tax. These companies make significant revenue from India, but they transfer their profits back to their home country or to another location.”  

He points to major companies like Amazon, Google, Meta, YouTube, Facebook, Instagram, and WhatsApp, which “profit immensely by advertising Indian products on their platforms, yet India receives no taxes from them.”  

Agrawal reminds us that India passed a Digital Tax law a few years ago but chose not to enforce it back then. “India was building friendly relations with the United States,” he says. Now, as the US increases its pressure, “Modi has brought out the ‘Digital Tax’ card to show America.”  

The situation is clear:  

If the US imposes tariffs, “American consumers will ultimately pay higher prices for Indian goods because of increased customs duties.” Even if exporters lose some market share in the US, “they still have the rest of the world to consider. So, India or its citizens will not face any significant loss.”  

If the digital tax is activated, American companies “will have to pay billions in taxes to India every year. The money they currently take from India to the US will need to be transferred only after paying Indian taxes, resulting in a direct loss of billions for the US.”  

Agrawal puts it succinctly: “After the Digital Tax threat, America is in a situation where it can neither accept the tariff nor reject it.”  

India's Take - Oil, energy, and the larger context

Amid this conflict is the issue of Russian oil. The US and the European Union have criticised India for purchasing crude from Moscow. However, an official statement clarified that India started these imports only because traditional suppliers redirected shipments to Europe.  

The statement highlights the irony: the EU traded €67.5 billion in goods with Russia in 2024 and €17.2 billion in services. LNG imports reached a record 16.5 million tonnes. Meanwhile, the US continues to import Russian uranium hexafluoride for its nuclear industry and palladium for its electric vehicle industry.  

For Indian channel partners, the message is simple. Reliable and affordable energy is essential. It ensures logistics, data centres, and supply chains operate smoothly, key components for the IT ecosystem.  

What this means for the channel  

The Indian channel partner community thrives on predictability, stable costs, clear regulations, and steady demand. The standoff over tariffs and the Digital Tax could disrupt some of these foundations.  

Costs may rise: if American platforms pass their digital tax costs on, small and medium-sized enterprises could face higher advertising and service fees.  

New opportunities: Domestic platforms and Indian cloud service providers may find new customers as businesses seek affordable options.  

Policy uncertainty: Partners should expect sudden changes. A new tariff, a retaliatory tax, or a policy reversal could change import costs or client budgets overnight.  

Export resilience: Many Indian IT exporters have already established connections outside the US. Expanding this diversity will be crucial in the coming months.  

The bottom line  

Mahendra Agrawal believes PM Modi has shown foresight: “He had prepared a response to a crisis that was anticipated five years ahead.”  

The standoff over tariffs and the Digital Tax is more than just a diplomatic struggle. It’s a test of India’s role in the global digital economy. The government is indicating it won’t allow multinational companies to profit without paying taxes while also securing affordable energy for its people.  

The channel partner community might monitor these developments closely. They should focus on diversifying the markets and service offerings. Flexible pricing and vendor negotiations might also help.  

As the dynamics have shifted. Now, India’s IT community must navigate these changes wisely.

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