The ongoing India–U.S. trade dispute has intensified after Washington announced a 25% penalty tariff on Indian goods in response to New Delhi’s continued imports of Russian crude oil. The move follows the collapse of Free Trade Agreement (FTA) talks and earlier reciprocal tariffs imposed by the United States. The penalty tariffs are set to take effect from August 27.
Background
On August 6, the U.S. declared new tariffs targeting Indian exports linked to Russian oil purchases. This came after a 25% reciprocal tariff on Indian goods from August 7, following failed FTA negotiations. Washington aims to pressure India into cutting Russian oil imports amid Western sanctions on Moscow.
India’s Reaction
The Ministry of External Affairs condemned the U.S. action as unfair and selective, pointing out that both the U.S. and European Union continue certain trade activities with Russia. Prime Minister Narendra Modi vowed to protect national interests, even at personal political cost, and assured support for farmers and exporters affected by the dispute. India has not yet announced retaliatory tariffs.
India’s Reliance on Russian Oil
Since the Ukraine conflict in 2022, Russian oil has become crucial for India, supplying over 35% of its crude by mid-2023. Indian refiners benefit from discounted prices, saving billions annually. Investments also tie Indian firms to Russian oil production and refining, making a sudden reduction economically and politically challenging.
Diplomatic Path Ahead
U.S. President Donald Trump is scheduled to meet Russian President Vladimir Putin on August 15, a development that could influence tariff decisions. American negotiators are also due to visit India later this month to explore a possible mini-trade agreement. India faces a strategic choice between maintaining Russian oil imports or offering trade concessions to retain U.S. market access.
Impact and Implications
The dispute is straining decades of cooperation in defence, technology, and strategic affairs. U.S. tariffs threaten key Indian export sectors like garments and textiles, as buyers may shift to tariff-free suppliers. The standoff underscores India’s challenge in balancing relations with both Washington and Moscow while safeguarding energy security and strategic autonomy in a volatile geopolitical environment.