Trump’s 50% Tariff gives a Big Jolt To The India-Us Trade

 

By T N Ashok

NEW YORK: Indo-U.S. trade tensions escalated to a flashpoint, on Wednesday as U.S. President Donald Trump doubled down on a defiant India with 50% tariffs on Indian imports, raising it from 25%, citing its continued purchases of Russian oil as a blatant violation of Washington’s sanctions. The increased rate will be effective after three weeks. Terming it a betrayal of strategic expectations, Trump’s move is seen as the most serious rupture in bilateral trade relations since his return to the White House and casts fresh uncertainty over the long-stalled $530 billion trade pact between the two countries by 20230.

The executive order signed late Tuesday accused the Indian government of “directly or indirectly importing Russian Federation oil,” prompting an “additional rate of duty of 25%” on top of the 25% already set to take effect as part of Trump’s sweeping global tariff regime. With this, India now joins a short list of countries—including Brazil, Myanmar, and Syria—that face U.S. tariffs of 40% or more. The effective 50% tariff on Indian goods is among the highest levied by the United States on any major trading partner.

Speaking to CNBC on Tuesday, Trump was blunt in his rationale: “India has not been a good trading partner… They’re buying Russian oil. They’re fuelling the war machine.” The timing of the announcement was telling—just hours before a broader tariff hike across multiple U.S. trading partners was due to take effect. US and NATO countries have been complaining that China and India have been fuelling the Russian war machine against Ukraine by continued purchase of Russian crude, proceeds of which went to fund the war in Crimea.

Trump’s fury stems from India’s decision to continue purchasing discounted Russian crude despite repeated U.S. warnings. For New Delhi, the rationale has always been economic and strategic—low-cost oil from Russia during a time of inflationary pressure and geopolitical uncertainty. Indian officials maintain that the oil purchases were carried out transparently and with an understanding that it was not in violation of any formal sanctions. The Ministry of External Affairs in New Delhi responded forcefully to the latest development, stating, “These actions are unfair, unjustified and unreasonable. India will take all necessary actions to protect its national interests.”

Until recently, India was poised to be among the early beneficiaries of a Trump-era trade normalization strategy following the U.S. withdrawal from the China-centric global supply chain. However, those hopes have been all but dashed by Trump’s aggressive push to bring manufacturing—especially tech production—back to the U.S.

In a May post on Truth Social, Trump declared: “I have long ago informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else.”

India had in fact benefited substantially from the U.S. pivot away from China. According to Bloomberg and Canalys, India accounted for 44% of U.S. smartphone imports in the last quarter, surpassing China. Many of those phones—especially Apple iPhones—are now made in India, largely due to Apple’s strategic shift in production. Tim Cook, Apple’s CEO, is expected to appear with Trump at the White House later today for a new investment announcement, even as Apple braces for a $1.5 billion hit next quarter due to existing tariff headwinds.

U.S. Commerce Department data shows that India was the 10th largest source of goods imports to the U.S. in 2024, with $87 billion worth of shipment. Sectors likely to be most affected by the new tariffs include pharmaceuticals, textiles, auto components, and electronics—particularly smartphones.

At the heart of the dispute is India’s refusal to fully align with U.S. sanctions on Russia, particularly in the energy sector. New Delhi has consistently argued that its oil purchases from Moscow are in national interest and not in violation of international law. Furthermore, Indian refiners buy from Russia on a commercial basis, and not as part of any government-to-government deal.

Nevertheless, Trump’s order frames the purchases as an affront to U.S. policy. It has also sparked concern in European capitals and in OPEC countries, with whom India has deepened energy relationships in recent years. In fact, state-run oil companies in India have already begun diversifying their crude basket, increasing purchases from Saudi Arabia, the UAE, Iraq, and even the United States itself.

There are signs that New Delhi anticipated such punitive measures and has been gradually reducing its dependency on Russian crude. In June 2025, for instance, National Oil companies such as Indian Oil Corporation (IOC) and Bharat Petroleum signed multi-year contracts with suppliers in the Middle East to ensure uninterrupted supply amid the threat of sanctions.

According to the Petroleum Ministry, Russian oil now comprises less than 22% of India’s total crude imports, down from 35% at its peak in 2023. Yet, despite these adjustments, Washington’s patience appears to have run out. What remains to be seen is whether India will double down on diversification or scale back Russian imports even further to placate U.S. concerns.

India’s trade strategists are now faced with a pivotal decision—resist or recalibrate. If India chooses to resist, it could look to deepen ties with alternative export markets like the EU, ASEAN, and the Gulf Cooperation Council (GCC), all of which have shown appetite for Indian products and services. New Delhi may also seek to expedite free trade talks with the UK and Australia to cushion the loss of U.S. market share.

The EU is India’s second-largest trading partner, accounting for trade in goods worth €120 billion in 2024, or 11.5% of India’s total trade. India is the EU’s 9th largest trading partner, accounting for 2.4% of the EU’s total trade in goods in 2024, well behind the USA (17.3%), China (14.6%) or the UK (10.1%). Trade in goods between the EU and India has increased by almost 90% in the last decade.

The EU’s imports from India comprise mainly of machinery and appliances, chemicals, base metals, mineral products, and textiles. India’s main exports to the EU consisted of machinery and appliances, transport equipment, and chemicals. Trade in services amounted to €59.7 billion in 2023 (with a deficit for the EU of €7.9 billion).

The EU’s share of foreign direct investment (FDI) stock in India reached €140.1 billion in 2023, up from €82.3 billion in 2019, making the EU a leading foreign investor in India. The stock of India’s FDI in the EU was €10.2 billion. Some 6,000 European companies are present in India.

But falling in line with Washington’s diktats could risk alienating Russia—a long-time defense and energy partner—and undermine India’s carefully calibrated strategic autonomy. “There is no binary choice here,” said former Indian foreign secretary Shyam Saran. “India must protect its strategic interests while also preserving access to global markets. It’s a balancing act.”

Indian exporters, already battling currency fluctuations and global demand softness, now face an uphill climb. For sectors like generic pharmaceuticals—which depend heavily on the U.S. for revenue—tariffs could be crippling. The Apparel Export Promotion Council (AEPC) has warned of job losses in textile hubs such as Tiruppur and Surat if orders shrink due to cost escalations.

India’s IT services, ironically, remain untouched by the current tariff regime, but fears persist that restrictions could soon expand to services, especially if immigration and H-1B visa tensions resurface.

The Trump-Modi equation, once hailed as a cornerstone of the new Indo-Pacific architecture, is now on shaky ground. Modi was one of the first foreign leaders to visit Trump after his second inauguration, but the mood has clearly soured. A former U.S. trade official commented anonymously: “Trump sees trade as leverage, not as partnership. He’s willing to weaponize it—even against allies—if it suits his domestic narrative.”

India, meanwhile, is unlikely to buckle easily. Its statement suggests retaliation may be on the cards, possibly through tariff hikes on American whiskey, Harley-Davidson bikes, or even the withdrawal of market access in sectors like fintech and digital payments where U.S. firms have a growing footprint.

The doubling of tariffs by the United States marks a major inflection point in the Indo-U.S. relationship, placing economic cooperation at odds with strategic alignment. As Washington prioritizes compliance over compromise, and New Delhi reaffirms its sovereignty over its energy choices, both countries risk drifting into a prolonged trade confrontation.

Whether this is a short-term disruption or the start of a longer-term decoupling depends on how both sides manage their immediate interests. For now, the world’s two largest democracies find themselves staring at a hard choice between principle and pragmatism. (IPA Service)

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