Trump Imposes 50% Tariff on India as Punishment for Buying Russian Oil

Donald Trump has enacted a 50% tariff on a majority of U.S. imports from India, responding to the country’s acquisition of discounted Russian oil. This decision, which took effect shortly after midnight on Wednesday in Washington, poses a serious threat to the Indian economy and is expected to disrupt global supply chains significantly.

Earlier this month, U.S. tariffs of 25% on Indian goods were implemented, but Trump decided to double that rate, linking it to India’s oil purchases from Russia, which the White House claims indirectly funds Russia’s military actions in Ukraine. Since returning to the White House in January, Trump has aggressively raised tariffs on imports from various countries, straining relationships with both allies and adversaries, while raising concerns over inflation.

As a result of this latest move, Indian exporters now face some of the highest tariffs imposed by Trump on foreign goods. Brazil is similarly dealing with 50% tariffs on its exports to the U.S. Indian officials argue that their country has been unfairly targeted due to its trade ties with Russia. They warn that India may strengthen its collaborations with Moscow and Beijing, distancing itself further from Washington.

Last year, Indian goods worth $87.3 billion were exported to the U.S., and now most of those exports will encounter substantial tariffs, although certain key items, such as smartphones, are currently exempt. The U.S. Department of Homeland Security confirmed this action in a recent notice, which has led economists to predict a significant decline in trade between the two nations.

In a post on Truth Social last month, Trump stated, “I don’t care what India does with Russia. They can take their dead economies down together, for all I care.” Meanwhile, in India, the government’s stance remains defiant, with Prime Minister Narendra Modi encouraging citizens to support local products. “All of us should follow the mantra of buying only ‘Made in India’ goods,” Modi stated on Tuesday, urging shopkeepers to prominently display signs promoting domestic items. He acknowledged that while the tariffs may increase pressure on the country, they are prepared to endure the challenges.

According to Santanu Sengupta, chief economist for Goldman Sachs in India, sustained 50% tariffs could lower GDP growth to below 6%, from an anticipated 6.5%. Competitors from countries like Turkey and Thailand, facing lower tariffs, are already attracting American buyers with more competitive pricing.

About 30% of India’s exports to the U.S., including pharmaceuticals, electronics, raw drug materials, and refined fuels, will remain duty-free. However, sectors such as textiles, gems and jewelry, and seafood, which have long relied on the American market, are seeing dwindling orders. “At a 50% tariff, it is very difficult to export,” Sengupta noted.

The impact is already evident, as the Federation of Indian Export Organisations (FIEO) reported that textile and apparel manufacturers in cities like Tirupur, Delhi, and Surat have halted production due to “worsening cost competitiveness.” FIEO President SC Ralhan commented that Indian products have become uncompetitive compared to those from China, Vietnam, Cambodia, the Philippines, and other Southeast Asian nations.

Ahead of the tariff announcement, Indian stocks fell, with the benchmark BSE Sensex declining by 1%, or 849 points, to 80,876 in Mumbai on Tuesday. The U.S., being India’s largest export market, accounts for nearly a third of shipments in crucial sectors like gems, jewelry, and textiles, underscoring the potential economic ramifications.

Even if tensions over tariffs subside, the trust between the two nations may suffer the most. A senior Indian trade official remarked, “Trump has blown it. The hard work between the two countries, which historically lacked trust but managed to build a solid strategic relationship, is now at risk.” This official noted that rebuilding that trust will require considerable time, likely not occurring until Trump is no longer in office.

While S. Jaishankar, India’s external affairs minister, labeled the U.S. demand for India to cease purchasing Russian crude as “unjustified and unreasonable,” he pointed out the hypocrisy of Europe’s greater trade with Russia. To avoid the additional U.S. tariffs, India would need to replace approximately 42% of its oil imports.

Despite Trump’s claims that India is indirectly supporting Russia’s war against Ukraine through its oil purchases, he has not applied similar tariffs on China, another significant buyer of Russian oil. He has also attempted to ease tensions with Moscow, inviting President Vladimir Putin to a summit in Alaska earlier this month and suggesting a trilateral meeting with Ukrainian President Volodymyr Zelenskyy to discuss the conflict.

Despite the ongoing tensions, Jaishankar indicated that trade discussions between the U.S. and India are still active. “We are two big countries; we need to have conversations … the lines are not cut,” he stated. Earlier optimism for a trade agreement that would cap tariffs at 15% faded after India declined to open its agricultural market to U.S. farm goods, fearing adverse effects on its vulnerable farmers.

India has turned to Russia, which it considers an “all-weather friend,” with Jaishankar recently visiting Moscow to meet with Putin, who is expected to travel to New Delhi later this year. Modi is also set to visit China for the first time in seven years to attend the Shanghai Cooperation Organisation summit, aiming to stabilize relations following a deadly clash in the Himalayas in 2020 that severely strained ties.

An anonymous senior Indian official remarked, “India will tiptoe toward China, but not in a full embrace. There is a trust factor from the past with China, and much history to reconcile, but the reality is that India must do business with China.” Michael Kugelman, a veteran South Asia analyst, noted, “The current [Trump] administration may set a record for the highest number of own goals with a top bilateral partner over such a short period of time.”