"This signals the lowest point in India-US relations over a very long time and will only alienate India's position in the world," said Deepanshu Mohan, professor of economics at OP Jindal Global University, following US President Donald Trump's imposition of 25 percent additional tariffs on India – doubling down on the 25 percent he had imposed a few days ago – taking the total levy to a whopping 50 percent.
Reacting to the tariffs, Indian markets took a tumble on Thursday, 7 August, with the BSE Sensex dropping by over 300 points and the NSE Nifty by more than 100.
The additional 25 percent tariffs announced by the US are in connection with India's continuing trade ties with Russia, which has come under intense scrutiny of late by the west amid the prolonged war in Ukraine.
To what extent will these tariffs impact the Indian economy? And while the US was initially supportive of New Delhi's purchase of oil from Moscow, what has changed the country's stance all of a sudden? The Quint analyses these questions and others with the help of experts.
Trump's Imposition of 50% Tariffs a New Low in Ties. Can India Avoid a Fallout?
1. What Will Be the Fallout of Trump's Tariffs Against India?
The most pertinent question at this time is the extent to which the Indian economy and markets will be hampered due to Trump's announcement.
India-US trade ties have grown exponentially over the decades: so much so that today, Washington is India's largest export destination. According to US government data, the country bought Indian products worth $87 billion in 2024, while India purchased goods worth $41 billion from the US – resulting in a massive trade deficit of over $40 billion for the Americans.
According to Deepanshu Mohan, the 50% tariffs are likely to hit India in a sectoral fashion, with the maximum impact being felt by the country's capital markets.
"Our capital markets are very integrated with the US," he tells The Quint, "and our exchange rate management since the early 2000s has been closely monitored with the valuation of the US dollar as we wanted to attract more foreign capital into the Indian market. So the exchange rate of the rupee vis a vis the dollar is bound to be impacted."
Mohan adds that products like textiles and pharmaceuticals – which have been in great demand in the US over the years – will be hit hard, with several orders getting cancelled in all likelihood.
Amid the turmoil, many observers have asked whether New Delhi should continue buying oil from Moscow, as antagonising the US will not bode well for India's markets. Instead, they have suggested that New Delhi either cut off or minimise its imports from Russia, just as it had done with Iran in 2019 after Trump, then in his first term, pulled the US out of the JCPOA (Joint Comprehensive Plan of Action) deal with Tehran and reimposed sanctions on the country and all others which continued trading with them.
However, reducing imports from Russia isn't like flipping a switch, experts suggest, as New Delhi is already far too entrenched in trade with Moscow, especially since the Ukraine war began.
Russia is responsible for close to 40 percent of the oil requirements of New Delhi, which imports 85 percent of its oil from abroad. This is a massive jump from the period before the Russia-Ukraine war, when Moscow accounted for only 0.2 percent of New Delhi's oil import bill. Further, Russia is New Delhi's largest defence partner and the total bilateral trade between both countries reached a record high of $68 billion in FY 2024-25 – nearly six times higher than the pre-COVID-19 pandemic trade valuation of $10.1 billion.
"If India’s imports of Russian oil and fertilisers are curtailed due to sanctions, it could lead to higher domestic energy and input costs, which would ripple through inflation, trade deficits, and household consumption," says Soumya Bhowmick, a Fellow at the Centre for New Economic Diplomacy.
Bhowmick says that for a country of India's scale, securing affordable energy supplies is essential for sustaining growth and Russia is a sacrosanct partner in this regard.
"Measures to curtail the import of Russian oil, if implemented indiscriminately, could dampen investor confidence and weaken bilateral economic ties, even as India continues to act responsibly in managing its trade choices."
Soumya BhowmickExpand2. Why Has India Accused US, EU of Double Standards?
Following the announcement of the first tranche of 25 percent tariffs against India, the Ministry of External Affairs (MEA) had hit out against the US and the European Union (EU) with a sharp statement, accusing them of "double standards" for condemning India and threatening sanctions over oil trade with Russia.
The MEA made four pivotal points in their statement:
1. India began importing from Russia because the former's traditional supplies were diverted to Europe following the outbreak of the Russia-Ukraine conflict. The US at that time had "actively encouraged" such imports by India for "strengthening global energy markets stability".
2. India's trade with Russia is a necessity compelled by the global market situation and is meant to ensure predictable and affordable energy costs to the Indian consumer.
3. The very nations criticising India are themselves indulging in trade with Russia, and unlike New Delhi's case, such trade isn't even a vital "national compulsion". For instance, in 2024 the EU had a bilateral trade of Euro 67.5 billion in goods with Russia and trade in services estimated Euro 17.2 billion in 2023, significantly more than India's total trade with Russia for that year.
4. The US continues to import uranium hexafluoride for its nuclear industry, palladium for its EV industry, fertilisers as well as chemicals from Russia.
According to Sanjeev Ahluwalia, a Distinguished Fellow at the Chintan Research Foundation, the MEA's statement – which has been India's sharpest response to western nations over trade with Moscow – clearly illustrates the "fallacy" of Trump and the EU's statements against India.
"Buying oil from Russia is not unlawful and India isn't violating any international laws. But Trump has twisted the story by making it seem like he's imposing moral tariffs on India, given that Russia is the aggressor according to them," Ahluwalia tells The Quint.
"But all of these countries that are aligning behind Ukraine have continued to do business with Russia in their own national interest even after the war began. So it's unfair of them to rebuke India for doing the same, especially for a commodity like oil which we don't have at home and have to import. So we really don't have an option."
Sanjeev AhluwaliaWhile the EU's trade with Russia has fallen since the beginning of the Ukraine war, the bloc continues to purchase an array of products from them, most prominently Russian gas. According to the Centre for Research on Energy and Clean Air, a Finnish think tank, the EU has paid Russia over $105 billion for gas imports – which accounts for almost 75 percent of Moscow's military budget for 2024 – since the outbreak of the war in February 2022. Further, the EU's imports of Russian Liquified Natural Gas (LNG) increased by 9 percent in 2024 as compared to 2023.
As for US-Russia trade, Washington has continued its import of a variety of chemicals from Moscow throughout the period of the war. In 2024, total trade between the two countries was $5.2 billion – albeit a drastic drop from $36 billion bilateral trade in 2021.
Expand3. What Explains Trump's Changing Stance on India-Russia Trade?
Yet another question is regarding the rationale behind Trump's changing stance on India-Russia trade ties.
At the time the Russia-Ukraine war had broken out and the US – then under former President Joe Biden – and other western nations were applying sanctions on Moscow and its close trading partners, India had been exempted from sanctions under the CAATSA (Countering America's Adversaries Through Sanctions Act) as New Delhi had unequivocally conveyed its position to Washington that it simply cannot stop its trade with Russia, particularly for oil, as it would greatly hamper supplies in the country.
In fact, Eric Garcetti, former US Ambassador to India under President Biden, had even said during an event in May that the US actually wanted India to buy Russian oil during the conflict to avoid the destabilisation of global oil supply.
"India bought Russian oil because we wanted someone to buy Russian oil at a price cap – that was not a violation or anything, that was actually the design of the policy, because as a commodity, we did not want the price of oil to go up," he was quoted as saying by Al Jazeera at event organised by the Washington-based Council on Foreign Relations in May 2024.
Moreover, when Trump came to power earlier this year he made no mention of India's trade with Russia, let alone offered any criticism. On the contrary, on more than one occasion, his statements and decisions could be viewed to be "pro-Russia".
For instance, Trump had in March decided to suspend all military aid to Ukraine – worth tens of billions of dollars – following a bitter meeting with Ukrainian President Volodymyr Zelenskyy at the White House a few days earlier. During the meeting, Trump had in in full media glare threatened to end US aid to Kyiv if it did not agree to a deal, which many viewed as highly lopsided, to end the war.
So what explains Trump's changing stance over the conflict, as a result of which New Delhi has been caught in the crosshairs? According to experts, the change in Washington's posture is driven less by any "breach of principles" and more by evolving geopolitical calculations.
"Trump's criticism of India's trade with Russia is a result of his increasing frustration over the longevity of the Ukraine war," says Deepanshu Mohan. "In the initial days of his second presidency, he was trying to settle the war using his own personal dynamic with Putin – which didn't yield benefits."
Mohan says that India has become a casualty during this shifting rhetoric because of two reasons: first, the prolongation of the war despite Trump claiming during the campaign trail in 2024 that he would settle the conflict on his very first day in office; and the second, because India-US trade negotiations still haven't succeeded.
"If trade talks would have worked out and India had given the US a free pass for agriculture, dairy products et al, such conversations would probably not be coming from Trump," he adds.
Others, however, suggest that Trump's statements against India could be a result of something that might have taken place behind the scenes.
"Trump's increasingly bitter comments, including calling India a 'dead economy', give the impression that he feels India backtracked on something, like an assurance they had given," says Sanjeev Ahluwalia.
"We don't know the reason behind these statements. Whether some talks took place, and India did actually backtrack on something – we don't have that information on hand. But publicly we haven't backtracked on anything, though that's how Trump is reacting."
Sanjeev AhluwaliaExpand4. How Can India Avoid an Economic Fallout?
Meanwhile, the situation in Raisina Hill will be one of 'all hands on deck' following the announcement of the tariffs. In the backdrop of the announcement, two high profile trips have already been announced in a bid to formulate a contingency plan to avoid an economic fallout.
Prime Minister Narendra Modi is scheduled to visit China on 31 August for the Shanghai Cooperation Organisation (SCO) Summit, his first trip to the country since the Galwan Valley clash in 2020. The trip is being viewed as a strategic step to mend soured ties in the hope that a recalibration of the New Delhi-Beijing relationship might be a balancing factor amid the US' tariffs.
Despite a dip in ties, China remains India's second-largest trading partner after the US – with bilateral trade reaching $127.7 billion in FY 2024-25.
Secondly, National Security Advisor Ajit Doval was dispatched to Moscow on Thursday, 7 August, to hold extensive discussions with officials and also prepare the groundwork for President Putin's visit to New Delhi later this year.
Apart from these visits, India will have to be quick on its feet regarding key fiscal decisions to ensure that the economy doesn't spiral out of control.
"India has several geoeconomic tools to minimise a fallout," says Soumya Bhowmick. "To start with, it can further diversify its energy import sources. New Delhi has already expanded oil sourcing from over 40 countries and has increased its use of non-dollar payment systems."
Bhowmick adds that on the domestic front, short-term shocks can be cushioned by bolstering strategic reserves, supporting affected sectors through targeted relief, and maintaining macroeconomic buffers.
Meanwhile, many have also speculated whether the imposition of tariffs and Trump's negative statements of late are nothing but negotiating levers to get India to agree to a favourable trade deal.
"President Trump’s rhetoric has often followed a pattern – authoritarian public posturing aimed at securing better terms in trade negotiations," Bhowmick says.
"Given that a comprehensive India-US trade deal has remained elusive, Trump's comments appear designed to extract leverage rather than signal hostility. New Delhi views the current episode more as a phase in hardball diplomacy than an indicator of long-term tension."
Soumya BhowmickExpand
What Will Be the Fallout of Trump's Tariffs Against India?
The most pertinent question at this time is the extent to which the Indian economy and markets will be hampered due to Trump's announcement.
India-US trade ties have grown exponentially over the decades: so much so that today, Washington is India's largest export destination. According to US government data, the country bought Indian products worth $87 billion in 2024, while India purchased goods worth $41 billion from the US – resulting in a massive trade deficit of over $40 billion for the Americans.
According to Deepanshu Mohan, the 50% tariffs are likely to hit India in a sectoral fashion, with the maximum impact being felt by the country's capital markets.
"Our capital markets are very integrated with the US," he tells The Quint, "and our exchange rate management since the early 2000s has been closely monitored with the valuation of the US dollar as we wanted to attract more foreign capital into the Indian market. So the exchange rate of the rupee vis a vis the dollar is bound to be impacted."
Mohan adds that products like textiles and pharmaceuticals – which have been in great demand in the US over the years – will be hit hard, with several orders getting cancelled in all likelihood.
Amid the turmoil, many observers have asked whether New Delhi should continue buying oil from Moscow, as antagonising the US will not bode well for India's markets. Instead, they have suggested that New Delhi either cut off or minimise its imports from Russia, just as it had done with Iran in 2019 after Trump, then in his first term, pulled the US out of the JCPOA (Joint Comprehensive Plan of Action) deal with Tehran and reimposed sanctions on the country and all others which continued trading with them.
However, reducing imports from Russia isn't like flipping a switch, experts suggest, as New Delhi is already far too entrenched in trade with Moscow, especially since the Ukraine war began.
Russia is responsible for close to 40 percent of the oil requirements of New Delhi, which imports 85 percent of its oil from abroad. This is a massive jump from the period before the Russia-Ukraine war, when Moscow accounted for only 0.2 percent of New Delhi's oil import bill. Further, Russia is New Delhi's largest defence partner and the total bilateral trade between both countries reached a record high of $68 billion in FY 2024-25 – nearly six times higher than the pre-COVID-19 pandemic trade valuation of $10.1 billion.
"If India’s imports of Russian oil and fertilisers are curtailed due to sanctions, it could lead to higher domestic energy and input costs, which would ripple through inflation, trade deficits, and household consumption," says Soumya Bhowmick, a Fellow at the Centre for New Economic Diplomacy.
Bhowmick says that for a country of India's scale, securing affordable energy supplies is essential for sustaining growth and Russia is a sacrosanct partner in this regard.
"Measures to curtail the import of Russian oil, if implemented indiscriminately, could dampen investor confidence and weaken bilateral economic ties, even as India continues to act responsibly in managing its trade choices."Soumya Bhowmick
Why Has India Accused US, EU of Double Standards?
Following the announcement of the first tranche of 25 percent tariffs against India, the Ministry of External Affairs (MEA) had hit out against the US and the European Union (EU) with a sharp statement, accusing them of "double standards" for condemning India and threatening sanctions over oil trade with Russia.
The MEA made four pivotal points in their statement:
1. India began importing from Russia because the former's traditional supplies were diverted to Europe following the outbreak of the Russia-Ukraine conflict. The US at that time had "actively encouraged" such imports by India for "strengthening global energy markets stability".
2. India's trade with Russia is a necessity compelled by the global market situation and is meant to ensure predictable and affordable energy costs to the Indian consumer.
3. The very nations criticising India are themselves indulging in trade with Russia, and unlike New Delhi's case, such trade isn't even a vital "national compulsion". For instance, in 2024 the EU had a bilateral trade of Euro 67.5 billion in goods with Russia and trade in services estimated Euro 17.2 billion in 2023, significantly more than India's total trade with Russia for that year.
4. The US continues to import uranium hexafluoride for its nuclear industry, palladium for its EV industry, fertilisers as well as chemicals from Russia.
According to Sanjeev Ahluwalia, a Distinguished Fellow at the Chintan Research Foundation, the MEA's statement – which has been India's sharpest response to western nations over trade with Moscow – clearly illustrates the "fallacy" of Trump and the EU's statements against India.
"Buying oil from Russia is not unlawful and India isn't violating any international laws. But Trump has twisted the story by making it seem like he's imposing moral tariffs on India, given that Russia is the aggressor according to them," Ahluwalia tells The Quint.
"But all of these countries that are aligning behind Ukraine have continued to do business with Russia in their own national interest even after the war began. So it's unfair of them to rebuke India for doing the same, especially for a commodity like oil which we don't have at home and have to import. So we really don't have an option."Sanjeev Ahluwalia
While the EU's trade with Russia has fallen since the beginning of the Ukraine war, the bloc continues to purchase an array of products from them, most prominently Russian gas. According to the Centre for Research on Energy and Clean Air, a Finnish think tank, the EU has paid Russia over $105 billion for gas imports – which accounts for almost 75 percent of Moscow's military budget for 2024 – since the outbreak of the war in February 2022. Further, the EU's imports of Russian Liquified Natural Gas (LNG) increased by 9 percent in 2024 as compared to 2023.
As for US-Russia trade, Washington has continued its import of a variety of chemicals from Moscow throughout the period of the war. In 2024, total trade between the two countries was $5.2 billion – albeit a drastic drop from $36 billion bilateral trade in 2021.
What Explains Trump's Changing Stance on India-Russia Trade?
Yet another question is regarding the rationale behind Trump's changing stance on India-Russia trade ties.
At the time the Russia-Ukraine war had broken out and the US – then under former President Joe Biden – and other western nations were applying sanctions on Moscow and its close trading partners, India had been exempted from sanctions under the CAATSA (Countering America's Adversaries Through Sanctions Act) as New Delhi had unequivocally conveyed its position to Washington that it simply cannot stop its trade with Russia, particularly for oil, as it would greatly hamper supplies in the country.
In fact, Eric Garcetti, former US Ambassador to India under President Biden, had even said during an event in May that the US actually wanted India to buy Russian oil during the conflict to avoid the destabilisation of global oil supply.
"India bought Russian oil because we wanted someone to buy Russian oil at a price cap – that was not a violation or anything, that was actually the design of the policy, because as a commodity, we did not want the price of oil to go up," he was quoted as saying by Al Jazeera at event organised by the Washington-based Council on Foreign Relations in May 2024.
Moreover, when Trump came to power earlier this year he made no mention of India's trade with Russia, let alone offered any criticism. On the contrary, on more than one occasion, his statements and decisions could be viewed to be "pro-Russia".
For instance, Trump had in March decided to suspend all military aid to Ukraine – worth tens of billions of dollars – following a bitter meeting with Ukrainian President Volodymyr Zelenskyy at the White House a few days earlier. During the meeting, Trump had in in full media glare threatened to end US aid to Kyiv if it did not agree to a deal, which many viewed as highly lopsided, to end the war.
So what explains Trump's changing stance over the conflict, as a result of which New Delhi has been caught in the crosshairs? According to experts, the change in Washington's posture is driven less by any "breach of principles" and more by evolving geopolitical calculations.
"Trump's criticism of India's trade with Russia is a result of his increasing frustration over the longevity of the Ukraine war," says Deepanshu Mohan. "In the initial days of his second presidency, he was trying to settle the war using his own personal dynamic with Putin – which didn't yield benefits."
Mohan says that India has become a casualty during this shifting rhetoric because of two reasons: first, the prolongation of the war despite Trump claiming during the campaign trail in 2024 that he would settle the conflict on his very first day in office; and the second, because India-US trade negotiations still haven't succeeded.
"If trade talks would have worked out and India had given the US a free pass for agriculture, dairy products et al, such conversations would probably not be coming from Trump," he adds.
Others, however, suggest that Trump's statements against India could be a result of something that might have taken place behind the scenes.
"Trump's increasingly bitter comments, including calling India a 'dead economy', give the impression that he feels India backtracked on something, like an assurance they had given," says Sanjeev Ahluwalia.
"We don't know the reason behind these statements. Whether some talks took place, and India did actually backtrack on something – we don't have that information on hand. But publicly we haven't backtracked on anything, though that's how Trump is reacting."Sanjeev Ahluwalia
How Can India Avoid an Economic Fallout?
Meanwhile, the situation in Raisina Hill will be one of 'all hands on deck' following the announcement of the tariffs. In the backdrop of the announcement, two high profile trips have already been announced in a bid to formulate a contingency plan to avoid an economic fallout.
Prime Minister Narendra Modi is scheduled to visit China on 31 August for the Shanghai Cooperation Organisation (SCO) Summit, his first trip to the country since the Galwan Valley clash in 2020. The trip is being viewed as a strategic step to mend soured ties in the hope that a recalibration of the New Delhi-Beijing relationship might be a balancing factor amid the US' tariffs.
Despite a dip in ties, China remains India's second-largest trading partner after the US – with bilateral trade reaching $127.7 billion in FY 2024-25.
Secondly, National Security Advisor Ajit Doval was dispatched to Moscow on Thursday, 7 August, to hold extensive discussions with officials and also prepare the groundwork for President Putin's visit to New Delhi later this year.
Apart from these visits, India will have to be quick on its feet regarding key fiscal decisions to ensure that the economy doesn't spiral out of control.
"India has several geoeconomic tools to minimise a fallout," says Soumya Bhowmick. "To start with, it can further diversify its energy import sources. New Delhi has already expanded oil sourcing from over 40 countries and has increased its use of non-dollar payment systems."
Bhowmick adds that on the domestic front, short-term shocks can be cushioned by bolstering strategic reserves, supporting affected sectors through targeted relief, and maintaining macroeconomic buffers.
Meanwhile, many have also speculated whether the imposition of tariffs and Trump's negative statements of late are nothing but negotiating levers to get India to agree to a favourable trade deal.
"President Trump’s rhetoric has often followed a pattern – authoritarian public posturing aimed at securing better terms in trade negotiations," Bhowmick says.
"Given that a comprehensive India-US trade deal has remained elusive, Trump's comments appear designed to extract leverage rather than signal hostility. New Delhi views the current episode more as a phase in hardball diplomacy than an indicator of long-term tension."Soumya Bhowmick