Trump Sparks New Tariff Dispute with India

The criticism of Indian trade policies by American President Donald Trump is not a recent development. In his initial presidential run, his commentary on the considerable import duties imposed by India began, calling the nation a notorious utilizer of tariffs as far back as 2019. Moving on to the year 2025, we find Trump commencing another round of tariff disagreement with India, this time due to another reason: New Delhi’s procurement of oil from Russia. On the second of April 2025, an Executive Order was enacted that applied a blanket 10 per cent ‘reciprocal’ tariff on almost every import item.

Though a select category of essential goods and raw materials were exempted from these levies, this signaled the beginning of stringent country-specific trade regulations. Multiple rounds of trade negotiations between the US and India yielded no results, leading President Trump to discontinue discussions abruptly towards the end of July. Announcing a harsh 25 per cent tariff increase on goods imported from India on the 30th of July, Trump drew attention to India’s steep tariffs and termed its non-tariff obstacles as disconcerting.

On August 6, yet another Executive Order was inked, imposing an additional 25 per cent tax on imports from India. This doubling of tariffs escalated India’s position to one among the most heavily taxed US trade associates. The justification put forth by the White House revolved around India’s alleged actions which were deemed to be ‘undermining’ attempts against Russia, particularly the profits earned on resale of procured oil. The date set for the enforcement of these additional duties is the 25th of August.

In response, New Delhi branded these actions as ‘greatly regrettable’ highlighting the fact that several other nations were also reliant on Russian oil due to economic compulsions. The Commerce Ministry of India displayed concerns stating that such substantial duties will effectively bring a halt to exports towards their biggest market, risking sectors ranging from textiles and gemstones to components for automobiles.

The extent of the impending risk is considerable given that approximately half of India’s annual 87 billion USD export traffic to the US is likely to take a hit, putting Indian firms at an estimated disadvantage costwise in comparison to counterparts in Bangladesh or Vietnam, of between 30-35 per cent.

Washington’s basis for levying these tariffs is primarily the oil trade between India and Russia. However, it’s essential to highlight that purchasing Russian oil has not contravened any US or EU sanctions. Indeed, there is no statute in the Western world that explicitly stops India from acquiring Russian oil. Though the US and G7 countries have put a lid on the price, which is a softer form of embargo preventing Western coverage of insurance and shipping if the oil exceeds the capped price.

The enforcement of this ‘covert ban’ relies significantly on compliance from Western corporations rather than directly compelling buyers, such as India, to desist from making purchases. In July of 2025, the European Union decided to re-evaluate its mechanism surrounding the Russian oil price cap replacing the original cap of USD 60 per barrel established by the G7 nations in December 2022.

The restated cap, which was determined to be 15 per cent below the six-month average price of Russian Urals crude, effectively dropping the cap to USD 47.60. This alteration, slated to take effect on the 3rd of September, 2025, indicates a reinforcement of the actions by Western countries in restricting Russia’s cash flow without significantly disrupting the global oil supply.

India’s response to these developments has been consistent: collaboration with the US will occur when it aligns with their interests, and they will diverge when it does not. This reflects India’s policy of strategic autonomy, a concept rooted in its participation in the Non-Aligned Movement of the 1950s.

In the sphere of the Indo-Pacific, India has maintained a tight alignment with the US and its allies in order to counterbalance China’s expanding power. This is evident in security gatherings like the Quad and increased defense cooperation. Simultaneously, India stays engaged with Russia for ensuring energy security.

Considering India’s GDP per capita is merely USD 2,500 and millions of its citizens still live in poverty, affordability of energy sources and economic development take precedence.

The trouble with American tariffs imposed on India might ostensibly appear to be about oil and Ukraine, but they divulge a more profound strategic discord between Washington and New Delhi. This isn’t a simple tariff squabble; it reveals starkly different expectations in an evolving world order.

Given its historical experience with colonial subjugation, India maintains firm grounds on developing an independent foreign policy in a multipolar world. From the US perspective, it’s about upholding an international alliance against authoritarian regimes. Both countries, however, aspire to maintain a strong strategic partnership, particularly with the aim to counterbalance China’s influence.