The United States has imposed a 50% tariff on a wide range of Indian goods, effective from Wednesday, a move that significantly escalates the economic tension between the two nations. The tariff, which doubles the previous duties, is a direct response to India’s continued purchase of Russian oil, a matter that has raised serious concerns in Washington due to its implications for Russia’s revenue amidst the ongoing war in Ukraine.
India has swiftly condemned the tariffs, calling them “unfair, unjustified, and unreasonable.” The Federation of Indian Export Organizations (FIEO) has already warned of the severe economic impact, particularly for smaller businesses. Ajay Sahai, the director general of FIEO, urged the Indian government to step in, asking for liquidity support to ensure companies can keep their employees on the payroll even as orders from the US begin to dwindle.
India’s export body has reported that sectors like textiles, seafood, and jewellery have already seen cancelled orders, with competitors from Bangladesh and Vietnam capitalising on the situation. This tariff, some analysts warn, could effectively act as a trade embargo, especially for smaller firms that may not have the resilience to withstand such heavy duties.
The United States’ decision to impose these tariffs comes after President Donald Trump’s administration ramped up pressure on India to halt its oil imports from Russia. This move is part of a broader strategy to curb Russia’s financial capabilities amid the war in Ukraine, and it has cast a shadow over US-India relations. The US has made it clear that it views India’s continued trade with Russia as a threat to global peace and stability.
While the new tariffs will apply to many Indian products, some sectors will be spared. Pharmaceuticals, computer chips, and smartphones are among the key sectors exempt from the tariff increases. Moreover, industries like steel, aluminium, and automobiles, which had already faced trade restrictions, are not affected by the new duty.
India, the world’s fifth-largest economy, relies heavily on exports to the US, which was the top destination for Indian goods in 2024, amounting to $87.3 billion. Despite this, the imposition of these tariffs is expected to have a profound impact, with smaller exporters feeling the strain. Sahai highlighted that the situation could lead to widespread job losses across affected sectors.
Prime Minister Narendra Modi’s government has vowed to protect the interests of Indian businesses and citizens. In an address marking India’s independence, Modi pledged to reduce the tax burden on citizens and reinforce the nation’s self-reliance. However, the growing tension with Washington has prompted India to consider strengthening ties with Beijing, a move that may alter the dynamics of India’s foreign policy in the coming years.
India began purchasing Russian oil in significant quantities as European countries diverted their attention to alternative energy sources following Russia’s invasion of Ukraine. In 2024, Russia supplied nearly 36% of India’s total crude oil imports. The cheaper oil imports have been beneficial for India, helping stabilize domestic fuel prices and saving billions of dollars in the process.
However, the Trump administration’s response to these purchases signals a shift in US policy. Peter Navarro, one of Trump’s top trade advisers, accused India of “cozying up” to Chinese President Xi Jinping, an alliance that Washington sees as problematic in its efforts to counterbalance China’s growing influence.
Trade experts, like Wendy Cutler from the Asia Society Policy Institute, warn that these high tariffs could result in years of strained relations between the two countries. She stated that India, which had once been considered a promising partner for trade agreements, now faces some of the highest tariffs imposed by the US in recent history.
The use of tariffs as a tool by President Trump is not unprecedented. His administration has previously employed such measures to address trade imbalances and alleged unfair practices across various regions, including the European Union and Indonesia. The recent imposition of tariffs on Brazilian goods, especially after the trial of former President Jair Bolsonaro, underscores Trump’s aggressive approach to international trade.
