Can India afford to wage a trade war with United States? Modi vs Trump in the open

India and the US are now at war of words, in a diplomatic sense. Two nationalist populist regimes not willing to back down, driven by a similar ‘make my country great’ attitude. But Viksit Bharat-focused Narendra Modi’s India take on US President Trump’s MAGA-esque United States? More importantly, can we afford to cut into our biggest trade partner?

It all began with Trump looking for an excuse to squeeze India in the now-DOA trade deal. He found it in Russian oil, something his preceding administration requested India to buy to keep global oil prices down. But that was a world just out of Covid.

When Moscow took aim at Ukraine in 2022, a $60-per-barrel cap was slapped on Russia. Since sanctions kept India—the world’s third-largest consumer of crude—from buying from Iran and Venezuela, Russian oil became a cheap bargain. Soon, our imports of crude from Moscow skyrocketed—to over 35 per cent of India’s imports in 2024.

And for a time, that made sense. Slowly, but steadily, discounts on Russian oil came down.

In the last quarter of fiscal 2025 (January to March), India just saved a paltry $3.8 billion from Russian discounts on their crude. In contrast, Indian exports to the US amounted to a little over $115 billion in the same three-month period, according to the Ministry of Commerce and Industry.

According to a Bloomberg report, Russian crude imports carried only a $4.50 per barrel discount over Saudi Arabian oil in May 2025. This is a far cry from when Putin’s oil had a $23 cheaper tag per barrel with Saudi Arabia’s back in 2023.

Discounts on Russian oil have steadily dried up over the past two years, the report noted, essentially dwindling any advantage India had in buying crude from Moscow. In fact, Indian Oil, Bharat Petroleum, and Hindustan Petroleum have already gone to the spot market to diversify their suppliers from the US to Nigeria and, of course, the United Arab Emirates.

The money India saves from buying Russian oil in 2025 vs the trade it would potentially lose does not make sense. In fact, experts and market watchers predict a 1 per cent impact on the country’s GDP on account of the latest Trump tariffs and associated sanctions.

Following the India-US trade numbers

In the calendar year 2024, US goods and services trade with India hit an estimated $212.3 billion, up 8.3 per cent from 2023, according to the Office of the US Trade Representative. US goods imports from India in 2024 totalled $87.3 billion, up 4.5 per cent.

Now, let’s take absolute numbers. India’s total imports from the US were $45.3 billion for FY2025. And our export to the US totalled $86.5 billion, according to the official Commerce ministry data (DGCI&S via Department of Commerce). That is a trade balance of $41.2 billion towards India. No wonder Trump wants to level the playing field.

All of these trade figures make one thing clear—the US is a titan of a trade partner when it comes to our exports. But when you look at imports, it is a whole different story.

China led the table. In FY2025, our imports from China stood at $113.5 billion. And the second place went to Russia at $63.8 billion. UAE came in close at $63.4 billion. Our biggest import—“S5 - Petroleum: Crude”, that too $143.1 billion of it!

Now, the US is the largest importer of pharma and gemstones from India. And what were India’s total exports to the US in these? “H6 - Drug Formulations and Biologicals” exports from India to the US in the last fiscal year stood at $9.7 billion. “G5 - Pearls, Gems, and Semi-precious Stones” export was $5.7 billion. But the leader was “P4 - Telecom Instruments” at $10.9 billion.

All of these, and many more sectors, will now come under the latest Trump tariffs. While initially it would be the US consumer paying the price, cheaper products from other countries could soon undercut the India advantage.

Business