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 duties on India to among the highest 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 after the two sides failed to reach a breakthrough in trade talks.
Alyssa Ayres, a former state department official now at George Washington University, called the deterioration in the US-India relationship “head-spinning”.
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Indian analysts said Mr Trump’s move was partly aimed at putting pressure on Russian president Vladimir Putin to end his war in Ukraine. But despite the threat of higher tariffs, India has continued to buy Russian crude, albeit at lower levels.
“Trump is trying to get at Putin and India is a soft target to do so,” said Ashok Malik, chairman 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 that Indian exports to the US, the country’s largest trading partner, could fall from $86.5 billion this year to about $50 billion 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 that the tariffs could knock as much as 1 percentage point off India’s GDP growth.
But Anubhuti Sahay, the bank’s head of India economic research, noted that New Delhi’s domestically focused economy is less exposed than more export-oriented Asian peers.
Semiconductors, consumer electronics and pharmaceuticals will be covered by separate, sector-specific US tariffs. But India is now among the worst-hit countries of Mr Trump’s tariff war, with overall duties on a par with Brazil’s and higher than those of China, whose rates are still being negotiated.
“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, over which prime minister Narendra Modi has vowed to “never compromise”. US trade negotiators called off a planned trip to New Delhi this week.
Indian government officials have made overtures to Russia and China, with Mr 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 Mr Modi and Mr 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, Mr Modi did not communicate with Mr Trump in the run-up to the tariff deadline, as he was concerned that the US president could try to squeeze in last-minute concessions. Mr Modi’s office did not respond to a request for comment.
Mr Linscott also pointed to the collapse in communication between Mr Trump and Mr Modi. “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. – Copyright The Financial Times Limited 2025
