What You Need To Know: Trump’s 25% Tariff on India Over Russia Ties Escalates Trade Tensions Amid Washington's New Oil Deal With Pakistan
US President Donald Trump has imposed a 25% tariff on all Indian goods, citing India's trade relationship with Russia and what he described as "unreasonably high" tariff barriers. The new tariff, set to take effect August 1, comes alongside additional penalties tied to India's continued energy and defense engagements with Moscow.
Calling India’s and Russia’s economies “dead,” Trump suggested the two nations “take their dead economies down together,” a comment that has drawn diplomatic concern.
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| Image Source: White House |
Despite India’s standing as the world’s fourth-largest economy and a strategic partner in the Indo-Pacific, Trump accused New Delhi of refusing to lower its barriers.
“We have done very little business with India -- their tariffs are too high, among the highest in the world,” he wrote. “Likewise, Russia and the USA do almost no business together.”
In a rare double-move, the US also announced sanctions on six Indian companies over oil transactions with Iran. These firms were accused of violating US sanctions by engaging in “significant transactions” involving Iranian petroleum. This came as part of a wider crackdown on 20 global entities defying US Iran sanctions.
In an unexpected shift, Trump then unveiled a major agreement with Pakistan -- India's rival -- to jointly explore and develop Pakistan’s “massive oil reserves.” He suggested that one day Pakistan could even export oil to India.
“We are in the process of choosing the Oil Company that will lead this Partnership,” he wrote. “Who knows, maybe they’ll be selling Oil to India someday!”
India’s stock markets responded with immediate volatility. The Nifty50 and BSE Sensex opened sharply lower but recovered over 700 points by mid-session.
Analysts in India say the market had priced in possible trade tensions, with foreign investors having withdrawn around Rs 25,000 crore in the past eight days.
Meanwhile, in New Delhi, the government said it was assessing the tariff impact and reiterated its commitment to national interest in ongoing trade negotiations.
Officials pointed to India’s careful stance in global trade talks and emphasized that discussions with the US remain active.
India’s purchase of discounted Russian crude has grown from under 2% before the Ukraine war to over 40% of total imports by June 2024. Refined products from this oil have reportedly entered Western markets, prompting scrutiny.
Additionally, Russia continues to be India’s primary defense supplier and offers key technologies without restrictions.
Opposition leader Rahul Gandhi echoed Trump’s sentiments in a scathing social media post, calling India’s economy “dead” and blaming Prime Minister Narendra Modi for its decline.
He listed demonetisation, GST flaws, the failure of "Assemble in India," and the weakening of small businesses and farmers as primary causes.
Trump’s barrage extended to Brazil and South Korea. He slapped a 50% tariff on Brazilian goods, excluding aircraft and energy, citing political issues surrounding former President Jair Bolsonaro.
South Korea, however, secured a revised deal that reduces tariffs to 15% in exchange for a $350 billion investment in US industry, including $150 billion for shipbuilding.
Canada too came under fire after expressing support for Palestinian statehood. “That will make it very hard for us to make a Trade Deal with them. Oh’ Canada!!!” Trump wrote.
Analysts add while India’s average tariff rates are higher than the US, they remain within WTO commitments. In contrast, the new US tariffs likely breach Washington’s own trade obligations.
India’s stance is echoed by experts who argue the US often demands wide-ranging concessions, including on e-commerce, agriculture, and public procurement.
Despite the provocations, Indian negotiators have so far resisted pressure to compromise on core sectors such as farming, where over 700 million Indians depend on subsistence and small-scale agriculture.
Similar deals with the EU, Japan, and the UK came with high US tariffs but also included large investments and preferential purchasing agreements.
India’s strategy appears focused on a long-term, balanced trade architecture.
“The commitment towards achieving this goal remains steadfast,” said a statement from the Ministry of Commerce. For now, India is preparing for a prolonged negotiation phase -- with tariffs in effect but diplomacy still active.