India Faces Increased Tariffs on Russian Oil Amid U.S. Trade Tensions
New Tariffs on Russian Oil Impacting India
The additional 25% tariff imposed by U.S. President Donald Trump on Russian oil purchases has come into effect, raising the total punitive tariff to 50%. This decision follows India's refusal to back down from buying Russian oil. The significant increase took effect at 9:30 AM today. Analysts have warned that the heightened tariffs could adversely affect exporters across various sectors and hinder growth prospects.
Impact on Indian Exports
According to the Global Trade Research Initiative (GTRI), the U.S. tariffs are expected to impact Indian exports valued at $60.2 billion. Labor-intensive sectors such as textiles, gems, jewelry, shrimp, carpets, and furniture could see a decline in exports by up to 70%, affecting millions of workers. These tariffs cover approximately 66% of India's exports to the U.S., which are projected to be worth $86.5 billion in the fiscal year 2025. If the tariffs remain in place, exports could drop to $49.6 billion next year, allowing competitors like China, Vietnam, and Mexico to capitalize on this gap.
Prime Minister Modi's Response
Ahead of the tariff's implementation, Prime Minister Narendra Modi emphasized that self-reliance should be a way of life for Indians and should be embraced with pride. He noted that products made in India, including those from foreign investments like Suzuki Motor Corporation, should also be considered indigenous.
U.S. Administration's Stance
The Trump administration has indicated that it will not delay the imposition of additional tariffs, confirming this move with a draft notification that outlines the new 25% tariff on top of existing ones. President Trump stated that these elevated tariffs aim to encourage Russian President Vladimir Putin to engage in negotiations regarding Ukraine.
Key Insights
As reported by Reuters, exporter groups estimate that the tariff increase could affect about 55% of India's trade exports to the U.S., valued at approximately $87 billion, giving an advantage to competitors like Bangladesh, China, and Vietnam. Affected sectors include textiles and apparel, gems and jewelry, shrimp exports, and leather products. An analysis by Moody's Analytics warns that the new U.S. tariffs will significantly reduce demand for Indian exports.
Potential Consequences
The report states, "Their largest customers will suffer from a decline in sales." It also mentions that the tariffs have left countries in Europe and the Asia-Pacific feeling "hurt," even as the U.S. remains their largest trading partner. Moody's further noted that some companies might reduce prices to maintain sales volume, but this could lower margins, limit wage increases, and reduce investment, ultimately impacting overall business performance.
Resilience in Certain Sectors
Analysts believe that sectors such as pharmaceuticals, smartphones, and steel may remain relatively insulated from U.S. tariffs. Exemptions in the tariff structure and strong domestic demand in India could help these sectors withstand some economic shocks.
Strategic Relations at Stake
The increase in tariffs could affect broader strategic relations. The U.S. has long aimed to strengthen ties with India through initiatives like the Quad, a security group designed to counter China. Earlier this year, India's Foreign Minister S. Jaishankar expressed a desire to enhance the defense and security focus of the Quad. However, the tariff tensions now threaten these efforts.
Prime Minister's Commitment
Speaking after inaugurating several projects in Ahmedabad, Prime Minister Modi asserted that India would not compromise the interests of farmers, small industries, and domestic producers. He urged citizens and businesses to prioritize indigenous products, stating, "We may face pressure, but we will endure it." Modi emphasized that his government would find a way forward despite Washington's economic pressures.
Implementation Timeline
President Trump signed an executive order imposing an additional 25% tariff on Indian goods, which will raise the total tariff to 50% by August 6, 2025. According to the order, these additional tariffs will take effect 21 days from today, starting on August 27.
India's Stance on Oil Purchases
India has yet to issue directives regarding oil purchases from Russia. The Indian envoy in Moscow stated that despite the rising U.S. tariffs on Indian goods, India would continue to procure oil from sources offering the "best deals."
Energy Security Focus
He further stated, "Our goal is to ensure energy security for India's 1.4 billion people, and cooperation with Russia and several other countries has helped stabilize the global oil market."
Official Notice from the U.S.
On Tuesday, the U.S. formally issued a public notice imposing a 25% additional tariff on imports from India, effective at 12:01 AM on August 27 (Eastern Standard Time) or 9:31 AM in India (Indian Standard Time). This notice, released by the Department of Homeland Security through U.S. Customs and Border Protection (CBP), implements Executive Order 14329 signed by President Trump on August 6.
Defending the Strategy
Vice President J.D. Vance defended this strategy on NBC's Meet the Press, describing it as "aggressive economic pressure" against Russia. He added, "We may apply additional pressure, or we may feel we are making progress and reduce that pressure. We still have many cards to play."
Failed Negotiations
Intensive negotiations with Indian officials over five rounds between March and July 2025 failed to yield concrete results. Following these talks, President Trump imposed a 25% tariff on Indian imports on July 30, effective August 7, 2025, citing India's high tariffs and trade barriers. He even referred to India's economy as 'dead.'
Ministry's Response
The Ministry of External Affairs previously described the tariffs as "unjust, unfair, and unreasonable," warning that India would take all necessary steps to protect its national interests.