India Faces Economic Shock as US Imposes Record Tariffs Over Russian Oil Imports

 

New Delhi — India is preparing for the fallout from sweeping new US tariffs, with economists warning of serious economic and diplomatic consequences. The move comes after US President Donald Trump imposed an additional 25% duty on Indian goods last week, citing New Delhi’s continued purchases of Russian oil — a step Washington says indirectly funds Moscow’s war in Ukraine.

The new measure raises total US tariffs on Indian exports to 50%, one of the highest rates ever applied to a major trading partner. While India’s Ministry of External Affairs pledged to “take all actions necessary” to defend national interests, analysts say there is limited room for negotiation, as the tariffs take effect next month.

“This will hit our economy hard. Fifty percent is huge, and although pharmaceuticals are exempt, many sectors will feel the strain,” said Manoj Joshi of the Observer Research Foundation. “India has few levers to push back — unless the US rolls back the decision, options are minimal.”

The tariffs follow months of strained trade talks between the two nations. In April, Washington imposed a 25% reciprocal tariff on Indian goods over oil purchases from Russia and trade imbalances. A July deal was anticipated but failed when Trump refused to approve it, later demanding broader US market access in key Indian sectors such as automobiles, steel, aluminum, and dairy — demands New Delhi rejected.

The US is India’s top export market, accounting for 18% of exports and around 2.2% of GDP. Economists estimate the new tariff could shave 0.2 to 0.8 percentage points off GDP growth. Beyond the economic impact, experts warn the move could dent India’s global influence, forcing it to rebalance ties with rivals like China and long-standing partners such as Russia.

Prime Minister Narendra Modi, who has focused on deepening US relations through forums like the QUAD, may now turn toward alternative blocs. He is expected to visit China later this month for the Shanghai Cooperation Organization summit and meet President Xi Jinping for the first time since the 2020 Galwan Valley border clash. Modi has also invited Russian President Vladimir Putin to New Delhi before year-end.

Policy analyst Mohan Guruswamy says the episode underscores strategic risks in India’s diplomacy: “India has been betting on the US and sidelining traditional allies. Now, the so-called strategic ally has delivered a rude shock.”