WILL TRUMP'S TARIFF GAMBLE BACKFIRE ON THE US?

Despite US President Donald Trump's threats to escalate the tariff battle with India, New Delhi has stood firm, prioritising security over Washington's demands

- By Prajakta Karnik

In a bold escalation of trade tensions, US President Donald Trump has imposed a staggering 50 per cent tariff on Indian goods, effective from August 27, 2025, as a direct penalty for India's unwavering purchases of Russian oil amid the ongoing Ukraine conflict. This measure, comprising an initial 25 per cent tariff augmented by an additional 25 per cent punitive duty, underscores Washington's frustration with New Delhi's energy procurement strategy, which has remained steadfast despite international pressures.

The tariffs, among the highest imposed by the US on any trading partner, threaten to disrupt bilateral trade valued at over USD 87 billion in 2024, impacting sectors from gems and jewellery to garments and footwear. India’s response has been resolute, emphasising that these imports are crucial for national energy security and economic stability, driven purely by market dynamics rather than geopolitical allegiance.

As the world’s third-largest oil importer, India argues that discounted Russian crude has been a lifeline, saving an estimated USD 17 billion since 2022 and enabling the country to maintain affordable fuel prices for its burgeoning economy. This standoff not only highlights the fragility of US-India relations under Trump's “America First” agenda but also reflects broader shifts in global energy and trade dynamics.

STRENGTHENING EXPORTS

One of the primary reasons India continues to rely on Russian oil is its role in bolstering exports through refined products. Indian refineries process Russian crude into high-value items like diesel and aviation turbine fuel (ATF), a portion of which is exported to global markets, including Europe. This practice has drawn sharp criticism from the US, labelling it as “profiteering” that indirectly funds Russia’s war efforts in Ukraine.