India Rethinks $3.6B Boeing Buy After U.S. Tariff Increase

India’s defence procurement roadmap is witnessing a recalibration as the Ministry of Defence has reportedly paused a $3.6 billion deal with the US to acquire Boeing P-8I maritime patrol aircraft, following a steep 50% surge in project costs.

Originally cleared by the US State Department in 2021 at $2.42 billion, the deal for six additional aircraft has seen its price balloon due to persistent supply chain disruptions, inflation, and new tariffs. The latest 25% tariff, imposed under the Trump-era policies earlier this August, has significantly impacted costs, especially for parts produced or exported from India, which are now taxed when incorporated into Boeing’s final product.

“Why have prices risen by 50%? The supply chain for the planes involves Indian exports or Indian-produced parts that now face a tariff when imported into the US or incorporated into the final product. This tariff hence raises the overall cost for Boeing, which passes the increased cost on to the Indian buyer.”

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According to defence sources, the move to freeze was part of a larger strategic review given the rising costs, changing geopolitical realities in the region and India attempting to be self-sufficient in the sphere of defence. The government has not released any formal statement concerning the status of the deal.

Meanwhile, in the civil aviation sector, Air India has sent its first Boeing 787-8 Dreamliner to the US for a retrofit. “The retrofitted plane… is expected to join the fleet by the end of this year,” said sources, with two legacy aircraft slated for upgrade monthly thereafter.