U.S. President Donald Trump has escalated trade tensions with India by imposing an additional 25% tariff on Indian goods, citing India's continued energy purchases from Russia. The new duty adds to an existing 25% tariff announced last week and is set to take effect within 21 days, according to a White House statement.
The executive order comes amid growing geopolitical strains and failed diplomatic efforts between Washington and Moscow to reach a breakthrough over the ongoing war in Ukraine.
Following Trump’s announcement, the iShares MSCI India ETF dropped to session lows, while oil prices spiked. The Indian rupee, however, remained stable in offshore trading at 87.91 per dollar.
India Responds
Indian Prime Minister Narendra Modi has defended his country’s Russian oil imports, calling them essential to the Indian economy. In a recent interview, Trump rebuked the policy, stating:
“They’re fueling the war machine. And if they’re going to do that, then I’m not going to be happy.”
India’s Ministry of External Affairs denounced the new tariffs as “unfair, unjustified, and unreasonable,” pledging to take all necessary actions to safeguard national interests.
Trade Fallout and Economic Risks
The latest levies form part of a broader tariff package targeting dozens of U.S. trading partners, aimed at reducing trade deficits and reviving domestic manufacturing. However, economists warn of potential global repercussions, including disrupted supply chains and rising costs.
Ajay Sahai, Director General of the Federation of Indian Export Organisations, described the move as a “severe setback,” warning it could lead Indian exporters to lose key international clients.
Other nations, including Switzerland, made last-minute appeals to the Trump administration. Swiss President Karin Keller-Sutter met with U.S. Secretary of State Marco Rubio on Wednesday in a final attempt to negotiate lower duties.
A Strained Strategic Partnership
Trump’s tariff move follows months of failed negotiations with New Delhi. He has criticized India for restricting market access to American goods and highlighted its ties to the BRICS bloc. Agricultural protections by India have been a particular sticking point in talks.
This policy shift marks a departure from Trump’s first-term approach, during which he maintained warm relations with Modi and viewed India as a key strategic counterweight to China.
In recent statements, Trump has accused India of maintaining “obnoxious” tariff barriers and showing indifference to the war in Ukraine. He has also criticized India’s membership in BRICS and its stance on the India-Pakistan conflict.
Pharmaceuticals in the Crosshairs
The U.S. administration is also reportedly considering tariffs on Indian pharmaceutical exports—one of India’s top three exports to the U.S., worth over $10.5 billion in 2024–25. Duties on drugs could affect over 40% of India’s exports to the U.S., compounding existing levies on steel, aluminum, and autos.
The Ukraine Factor
Trump has tied the tariffs to India’s and others’ energy imports from Russia, accusing them of undermining global pressure on Moscow. The president has threatened secondary sanctions on countries that continue to purchase Russian energy if a ceasefire is not reached by August 8.
Talks between Russian President Vladimir Putin and U.S. envoy Steve Witkoff ended without concrete progress. Russia’s foreign policy aide, Yuri Ushakov, confirmed that both sides exchanged “signals” regarding the Ukraine conflict but offered no details.
In a press conference, Trump indicated that further tariffs may be imposed on other nations, including China, depending on their future energy relations with Russia.
“We’ll be doing quite a bit of that,” Trump said. “We’ll see what happens over the next fairly short period of time.”