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The US has slapped punitive tariffs on India over its purchases of discounted Russian oil, dealing a blow to the world’s fastest growing large economy and deepening a rift between Washington and New Delhi.
The 25 per cent levy — which came on top of a 25 per cent “reciprocal” tariff — took effect at 12.01am US eastern time on Wednesday and raised rates on India to among the highest rates in the world.
President Donald Trump’s announcement this month that the US would double its tariff rate on India marked a sudden escalation of tensions, following the sides’ failure to reach a breakthrough in trade talks. Negotiators had initially targeted the first stage of a trade deal by early summer.
Alyssa Ayres, a former state department official now at George Washington University, called the deterioration in the US-India relationship “head spinning”.
Indian analysts said Trump’s move was partly aimed at putting pressure on Russian President Vladimir Putin to end his war in Ukraine. India has continued buying Russian crude, albeit at lower levels, despite the threat of higher tariffs.
“Trump is trying to get at Putin and India is a soft target to do so,” said Ashok Malik, chair of The Asia Group’s India practice and a former foreign ministry policy adviser.
The Global Trade Research Initiative, a New Delhi-based think-tank, predicted Indian exports to the US, its largest trading partner, could fall from $86.5bn this year to about $50bn in 2026.
It said textiles, gems, jewellery, shrimp and carpets would be worst affected, with the sectors bracing for a 70 per cent collapse in exports, “endangering hundreds of thousands of jobs”.
Standard Chartered has forecast the tariffs could knock as much as 1 percentage point off India’s GDP growth, though Anubhuti Sahay, the bank’s head of India economic research, noted that its domestically focused economy was less exposed than more export-oriented Asian peers.
Semiconductors, consumer electronics and pharmaceuticals will be covered by separate, sector-specific tariffs. But the overall rate makes India among the worst-hit countries under Trump’s tariff war, on a par with Brazil and higher than China, which is on a separate negotiating track.
“I think India could survive 25 per cent . . . but 50 per cent is a completely different scenario,” said Mark Linscott, a former US trade negotiator who now advises US and Indian businesses.
Talks had stalled in part over New Delhi’s resistance to opening up the country’s vast agricultural and dairy sectors, which Prime Minister Narendra Modi has vowed to “never compromise”. US trade negotiators called off a planned trip to New Delhi this week.
Meanwhile, Indian government officials have been making overtures to Russia and China, with Modi set to make his first visit to the latter country in seven years this weekend. Foreign minister Subrahmanyam Jaishankar last week encouraged Russian companies to engage “more intensively” with India.
Some Indian officials and analysts believe the stalemate partly reflects a cooling of personal ties between Modi and Trump, who has threatened Apple for shifting some manufacturing to India, mocked the country’s “dead economy” and courted its biggest rival Pakistan.
According to three people briefed on the matter, Modi did not communicate with Trump in the run-up to the US tariff deadline, as he was wary of the president trying to squeeze in concessions outside the negotiating framework. Modi’s office did not respond to a request for comment.
Linscott also pointed to the collapse in Trump-Modi communications. “The missing component was the leader-to-leader conversation, and the opportunity for the president to seal the deal, to put his stamp of approval on it,” he said.
