Trump Implements 25% Tariff on India for Purchasing Oil from Russia

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United States President Donald Trump has imposed an additional 25 per cent tariff on Indian goods, citing India’s continued imports of Russian oil in a move that sharply escalated tensions between the two nations after trade talks reached a deadlock.

The new import tax, effective 21 days after 7 August, will raise duties on some Indian exports to as high as 50 per cent — among the highest levied on any US trading partner.

Trump’s executive order imposing the extra tariff on Thursday AEST did not mention China, which also imports Russian oil. A White House official had no immediate comment on whether an additional order covering those purchases would be forthcoming.

Analysts said Trump’s move marks the most serious downturn in US-India relations since his return to office in January.

The tariffs threaten to disrupt India’s access to its largest export market, where shipments totalled nearly US$87 billion ($134 billion) in 2024, hitting sectors like textiles, footwear, gems and jewellery.

It also marks a shift from the warm ties witnessed during Trump and Indian Prime Minister Narendra Modi’s February meeting, analysts said, pointing out Trump’s recent remarks calling India’s economy “dead”, its trade barriers “obnoxious” and accusing the country of profiting from cheap Russian oil while ignoring the killings of Ukrainians in Russia’s three-and-a-half-year-old invasion of its neighbour.

‘Extremely unfortunate’

India’s external affairs ministry called the decision “extremely unfortunate”, noting many other countries are also importing Russian oil in their national economic interest.

“India will take all necessary steps to protect its national interests,” it said, adding that purchases were driven by market factors and the energy needs of India’s 1.4 billion people.

The development comes as Modi prepares for his first visit to China in over seven years, suggesting a potential realignment in alliances as relations with the US fray.

Oil prices edged up about 1 per cent on Thursday after falling to a five-week low in the prior session after Trump penalised India for buying Russian oil and in light of a larger-than-expected US crude storage draw last week.

Last week, US treasury secretary Scott Bessent warned China that continued Russian oil purchases could trigger new tariffs, as the US prepares for the expiry of a US-China tariff ceasefire on 12 August.

Disruption to Indian exports

Exporters and trade analysts warn the tariffs — which Trump casts as a driver to reduce US trade deficits and reinvigorate domestic manufacturing — could severely disrupt Indian exports.

“This is a severe setback. Nearly 55 per cent of our shipments to the US will be affected,” said SC Ralhan, president of the Federation of Indian Export Organisations.

The increased duties place Indian exporters at a 30 to 35 per cent disadvantage versus trade rivals in Vietnam, Bangladesh and Japan.

“With such obnoxious tariff rates, trade between the two nations would be practically dead,” said Madhavi Arora, economist at Emkay Global.

Indian officials acknowledged pressure to return to negotiations with the Trump administration. A phased cut in Russian oil imports and diversification could be a part of the compromise.

“We still have a window,” said a senior Indian official, requesting anonymity. “The fact that the new tariffs take effect in 21 days signals the White House is open to talks.”

Another official said there were no immediate plans for Modi or senior leaders to travel to Washington, nor were any retaliatory measures being considered.

Instead, the government is weighing relief for exporters, including interest subsidies and loan guarantees.

Trump’s move follows five rounds of inconclusive trade talks, which stalled over US demands for wider access to Indian agriculture and dairy markets. India’s refusal to cut Russian oil imports — which hit a record US$52 billion ($80 billion) last year — ultimately triggered the tariff escalation.