Author: Alberto Cossu – 28/08/2025
On July 31, 2025, President Donald Trump announced the imposition of a 25% tariff on all imports from India, accompanied by an additional “penalty” linked to India’s massive purchases of oil and weapons from Russia. While protectionist measures had long been expected within the framework of ongoing trade negotiations, the explicit connection between energy issues and sanctions has been perceived as a drastic shift in U.S. trade policy, with profound repercussions for New Delhi and for the world order.
In the decade leading up to 2025, U.S.–India relations experienced highs and lows, oscillating between ambitious partnership rhetoric, trade disputes, and growing shared interests. Trump’s decision to impose a 25% tariff, effective August 1, 2025, comes after years of stalled negotiations over a bilateral free trade agreement.
The U.S. had frequently criticized India for its high tariffs and restrictive non-tariff barriers, while India pressed for greater access for sectors such as skilled labor and demanded protections for agriculture, a vital sector. What surprised observers most, however, was the additional “penalty” tied to imports of Russian energy and arms, which remain fundamental to India’s economic expansion.
After Russia’s invasion of Ukraine in 2022, the share of Russian oil in India’s imports skyrocketed from 0.2% to over 35% by the summer of 2025, making Russia India’s main crude oil supplier.
Trump’s Strategic Logic: Beyond Trade
President Trump’s stance marks a clear break from previous administrations, openly linking trade policy to foreign policy choices and energy security. The official motivations are twofold: punishing India’s “excessively high tariffs” and, above all, reducing Russia’s revenues in order to choke the financial resources fueling its war in Ukraine.
Although Trump has described India as a “friend,” he has repeatedly criticized New Delhi’s reluctance to take a clearer stand with the U.S. against Russia. The imposition of penalties therefore represents a clearly punitive mechanism for New Delhi, given the importance of the U.S. market for Indian exporters, worth about $190 billion annually (total trade good+services). The trade surplus in goods with the U.S. accounts for about $40 billion, while the total trade deficit is more than $250 billion. The U.S. is therefore India’s top market and a pillar of its economy, especially when considering the services trade generated by American companies. This scenario constrains India’s strategic choices, especially regarding international trade. In addition, it’s worth mentioning that India acquires oil from Russia at discounted prices and subsequently sells the refined oil derivatives to Europe. While this generates enormous profits for India’s refineries, it comes at the cost of denting European competitiveness.
With this move, Washington aims to influence India’s foreign policy and force a choice: maintain strategic autonomy or align more closely with the West.
The threat of tariffs targets not only India and Russia but is also interpreted as a warning to all countries that continue to sustain deep economic ties with Moscow, bypassing Western sanctions. Washington’s broader objective is to slow any attempt to build a new Eurasian axis that could challenge the Western-dominated commercial and geopolitical order.
Consequences for India
The tariff announcement immediately triggered turmoil in Indian markets: the rupee lost value, and major stock indices fell sharply. Analysts forecast a potential slowdown in India’s GDP growth of between 0.2% and 0.4% in the next fiscal year, with growth possibly slipping below 6%, against earlier, more optimistic projections.
Key export sectors such as textiles, pharmaceuticals, and electronics are among the most vulnerable, threatening jobs and undermining efforts to reduce the trade surplus with the U.S., estimated at around $40 billion.
Agriculture, employing over 40% of India’s workforce, is particularly exposed. Earlier attempts to liberalize this sector in talks with Washington had faced strong domestic opposition. Now, with U.S. tariffs raising the pressure, Prime Minister Narendra Modi faces internal criticism and the prospect of heightened social tensions ahead of elections.
Historically, India has pursued a foreign policy of non-alignment and strategic autonomy, maintaining good relations with both Washington and Moscow. New Delhi’s response to Trump’s tariffs is defensive: the imposition of duties is seen as a direct challenge to India’s ability to sustain a non-aligned policy.
Experts and diplomats warn of a potential deterioration in bilateral ties, especially as the U.S. makes faster progress with other Asian partners. For India, yielding to U.S. pressure would mean reducing its room for maneuver vis-à-vis Russia and China, while resisting could trigger further sanctions. This strategy could also strain relations within the wider BRICS+ grouping.
For years, deeper Indian integration into the Western system has been a key U.S. objective in containing China’s growing influence in Asia. Trump’s hardline stance, however, risks undermining this goal and weakening the Indo-Pacific Economic Framework.
An exasperated India might intensify its alignment with China and Russia, slowing the formation of a united Western front in Asia.
India’s Response: Between Diplomacy and Resolve
Indian Trade Minister Piyush Goyal has pledged to protect sensitive sectors and to seek a “fair and mutually beneficial” negotiated solution. Behind the scenes, however, pressure is mounting, with the political opposition ready to exploit the crisis. Concerns are also growing over the U.S. decision to support financing for the exploitation of massive energy reserves in Pakistan—an almost provocative move, given Islamabad’s deeply adversarial relationship with New Delhi.
Some circles believe the situation could accelerate domestic reforms and encourage diversification of export markets, especially toward BRICS countries. Others, however, see concessions to the U.S. as inevitable in order not to jeopardize growth prospects.
On the one hand, economic pragmatism may push both countries toward rapprochement. The U.S. does not want to drive India too far into Russia’s camp and shares with New Delhi strategic interests in Asia.
Negotiations will therefore continue, with possible intermediate deals that could limit the intensity or duration of tariffs, linking them to progress on reducing non-tariff barriers or to increases in U.S. energy imports.
If Trump maintains an uncompromising stance, negative consequences for diplomatic stability are likely: India could harden its nationalist positions, bolster Chinese rhetoric about Western unreliability, and weaken multilateral coalitions and agreements under construction.
More broadly, the instrumentalization of tariffs for geopolitical purposes could undermine trust in the global trading system and accelerate trends toward regionalization and fragmentation.
Conclusions
Trump’s decision to impose tariffs on India, intertwining them with the Russian dossier, marks a critical moment in which economic policy and geopolitical strategy converge with lasting and significant effects. The repercussions for India’s economy, its foreign policy, and the global order may be far-reaching. Yet, as noted, the real target may be the BRICS+ group, toward which Trump has always expressed thinly veiled hostility.
Despite the willingness of both sides to find an agreement, the episode highlights the fragility of the post-pandemic trade order and the enduring power of great-power rivalry in shaping the trajectories of emerging states.