The United States recently announced its own retaliation against India, hitting the country with a 50% tariff penalty that took effect on August 27. This decision follows closely on the heels of President Donald Trump’s unilateral decision to impose a 25% tariff on all Indian imports. He did this very deliberately to target India’s oil and arms purchases from Russia. The escalating tensions between the two countries highlight the complications arising from India’s increased reliance on Russian crude oil since the onset of the Ukraine conflict.
India is also the most protectionist— i.e . heavily taxed—US trading partner in Asia. The latest wave of tariffs are likely to disproportionately affect India’s export-oriented sectors. Textiles and jewellery, both heavily dependent on foreign markets, will be hardest hit. According to analysis these tariffs may cost India’s economy up to a half a percent loss in growth. This represents a deepening danger for a nation determined to make great strides in economic advancement.
The diplomatic relationship between India and the US has been sorely tested over Delhi’s persistent import of Russian oil at a discount. In 2024, Russian crude accounted for a remarkable 35%-40% of India’s total oil imports. This is a stunning increase from just 3% in 2021. This change has thrown ongoing reform talks with Washington into disarray and caused deep concern among US officials.
In defense against the backlash prompted by these tariffs, Indian officials have staunchly defended their decision to buy Russian oil. They argue that as a major energy importer, India must prioritize affordability to shield millions of its citizens from rising energy costs. The Indian government argues that such purchases are crucial to ensure sustained economic stability, especially as global oil prices fluctuate wildly.
Earlier this month, US Treasury Secretary Scott Bessent raised the alarm that India was taking the wrong approach. He added that secondary tariffs on India could be increased if India fails to cooperate.
“We’ve put secondary tariffs on Indians for buying Russian oil. And I could see, if things don’t go well, then sanctions or secondary tariffs could go up,” – Scott Bessent
Trade talks between Delhi and Washington have been ongoing for months. US negotiators are scheduled to start arriving in India on August 25 to begin launching a new round of talks. Yet both sides have a major obstacle, as Trump has for years designated India a “tariff abuser,” making the conversation much more difficult.
Bessent stressed the need to get European countries on board with US sanctions on Russia. He pointed to the destructive effects of the tariffs.
“President Trump is meeting with President Putin, and the Europeans are in the wings carping about how he should do it, what he should do. The Europeans need to join us in these sanctions,” – Scott Bessent
Yet, if these tensions continue to persist, the economic costs for each country may be truly devastating. The new tariff regime not only threatens India’s economic sectors but complicates international relations amid a global energy crisis.