US President Donald Trump announced on Wednesday that America will impose a 25 per cent tariff on all goods imported from India starting 1 August, plus an unspecified penalty over the country’s continued purchases of Russian oil and military equipment.
The president unleashed the tariff bombshell in a Truth Social post, accusing India of maintaining “the highest tariffs in the world” and criticising New Delhi’s energy relationship with Moscow amid the Ukraine war. Trump declared India would face “a tariff of 25%, plus a penalty” but did not specify the amount or nature of the additional levy.
While India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non-monetary Trade Barriers of any Country,” Trump wrote on his social media platform.
Russian Oil Purchases Draw Presidential Ire
The president took particular aim at India’s energy relationship with Russia, highlighting what he called problematic ties at a critical moment in the Ukraine conflict. Trump noted that India “has always bought a vast majority of their military equipment from Russia, and are Russia’s largest buyer of ENERGY, along with China.
“ALL THINGS NOT GOOD! INDIA WILL THEREFORE BE PAYING A TARIFF OF 25%, PLUS A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST,” Trump declared, adding “THANK YOU FOR YOUR ATTENTION TO THIS MATTER. MAGA!”
India’s commerce ministry, which is leading the trade negotiations with Washington, did not immediately respond to requests for comment on the tariff announcement. The penalty represents a dramatic escalation from earlier suggestions that India might face tariffs in the 20-25 per cent range.
India’s Russian Oil Imports Surge Since Ukraine War
India’s imports of crude oil from Russia have increased nearly 13-fold since Moscow’s invasion of Ukraine, jumping from less than $2.5 billion (£1.9 billion) in 2021-22 to over $31 billion (£24 billion) in 2022-23. Russia has become India’s second-largest source of crude oil imports with a 19.1 per cent share, according to trade data.
The discounted Russian oil has proved economically beneficial for India, with the country importing Russia’s Ural oil at an average discount of nearly 9 per cent per barrel compared to prices from Iraq, its second-largest supplier. This discount increased to 14 per cent by April 2023.
Senator Lindsey Graham has proposed legislation that would impose 500 per cent “secondary tariffs” on countries buying Russian energy, with strong bipartisan support emerging for such measures. The Center for Strategic and International Studies notes that India’s oil purchases have saved Indian refineries an estimated $11-25 billion (£8.5-19.3 billion) in 2023-2024 whilst enabling Putin to continue funding his war effort.
Military Equipment Dependence Complicates Relations
India’s military relationship with Russia dates back to the Cold War era, with over 85 per cent of India’s arsenal consisting of Russian or Soviet-made weaponry. Despite efforts to diversify suppliers to include France, Israel, the UK and the US over the past decade, India remains heavily dependent on Russian military equipment and spare parts.
A $3.3 billion (£2.6 billion) deal scheduled for 2025 involving a ten-year lease of a Russian nuclear submarine to India is reportedly close to cancellation due to Western sanctions. New Delhi has also voluntarily abandoned plans to purchase 48 Mi-17V-5 military transport helicopters and suspended negotiations for 10 Ka-31 early warning helicopters.
India should undoubtedly be added to the list of superpowers,” Russian President Vladimir Putin stated recently, emphasising Moscow’s determination to maintain ties despite Western pressure. “We are developing relations with India in all directions.”
Trade Talks Hit Impasse Despite Optimistic Rhetoric
The tariff announcement comes after months of negotiations between Washington and New Delhi failed to produce a breakthrough. Commerce and Industry Minister Piyush Goyal had expressed confidence that India would secure “preferential” tariffs compared to economic rivals, telling CNBC on Thursday that negotiations were “progressing extremely well.
Trump had previously set multiple deadlines for countries to negotiate trade agreements or face higher tariffs. After initially threatening a 26 per cent tariff on Indian goods in April, he granted a 90-day pause that was later extended to 1 August.
US Trade Representative Jamieson Greer told CNBC on Monday that reaching an elusive India trade agreement would require “more negotiations” between the two countries. “They have expressed strong interest in opening portions of their market, we of course are willing to continue talking to them,” Greer said. “But I think we need some more negotiations on that with our Indian friends to see how ambitious they want to be.”
Trade Imbalance Fuels Trump’s Frustration
The US imported $87 billion (£67 billion) worth of goods from India last year, whilst India imported only $42 billion (£32 billion) from America, creating a significant trade deficit that has long frustrated Trump. The president has repeatedly cited India’s high tariffs as a major barrier to American exports.
The US imposes a 2.5 per cent tariff on passenger vehicles, whilst India charges 70 per cent on the same products. For networking equipment, America imposes no tariffs whilst India levies 10-20 per cent. Trump has frequently noted that America maintains one of the world’s lowest average tariff rates at 3.3 per cent, compared to India’s 17 per cent.
Indian officials have been preparing revised tariff reduction proposals, with sectors including automobiles, textiles, pharmaceuticals, electronics and agriculture under consideration for potential concessions. However, agriculture remains particularly sensitive for India, where farmers constitute a significant voting bloc.
Broader Tariff Strategy Takes Shape
The India announcement forms part of Trump’s wider tariff strategy, which has seen him threaten or impose duties on multiple trading partners. On the same day, Trump confirmed that “THE AUGUST FIRST DEADLINE IS THE AUGUST FIRST DEADLINE — IT STANDS STRONG, AND WILL NOT BE EXTENDED. A BIG DAY FOR AMERICA!!!”
Markets reacted nervously to the announcement, with concerns growing about the impact on global trade flows. India’s role in the BRICS grouping of emerging economies, which includes Russia and China, has added another layer of complexity to negotiations, with Trump threatening additional tariffs on countries aligning with “Anti-American policies of BRICS.
As the deadline approaches, Indian negotiators face a difficult choice between accepting punitive tariffs that could harm key export sectors or making concessions that might prove politically unpopular at home. With both nations viewing the relationship as strategically important, the coming days will test whether economic pragmatism can overcome political posturing.
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