Trump imposes 25% tariff, penalty on India for Russian Oil, arms purchases

US President Donald Trump
| Photo Credit:
Bloomberg

US President Donald Trump has announced reciprocal tariffs of 25 per cent on Indian goods plus an unspecified penalty for buying arms and oil from Russia in response to New Delhi’s refusal to give in to demands for sweeping tariff cuts in the ongoing bilateral trade agreement negotiations (BTA).

Trump criticised India for its high tariffs and  “strenuous and obnoxious” non-trade barriers while announcing the reciprocal tariffs on his social media platform, Truth Social, on Wednesday. 

He said: “Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non-monetary Trade Barriers of any Country. Also, they have always bought a vast majority of their military equipment from Russia, and are Russia’s largest buyer of ENERGY, along with China, at a time when everyone wants Russia to stop the killing in Ukraine…”

India’s response

The tenor of Trump’s statement was matched by the sharpness of the Indian response.

“India and the US have been engaged in negotiations on concluding a fair, balanced and mutually beneficial bilateral trade agreement over the last few months. We remain committed to that objective. The Government attaches the utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, and MSMEs. The Government will take all steps necessary to secure our national interest, as has been the case with other trade agreements, including the latest Comprehensive Economic and Trade Agreement with the UK,” the Commerce & Industry Ministry said.

Trade stand-off

Trump’s tariffs, which are to be imposed from August 1 when his reciprocal tariff deadline lapses, have rattled exporters who hope for a trade deal soon. These tariffs not only set them at a disadvantage vis-a-vis competitors such as Vietnam and Indonesia, which are to attract about 20 per cent tariffs, but the added threat of a penalty has created uncertainty, which could hurt business further, exporters say.

Experts advise that India must not give in to the “arm-twisting” by the US and should continue to protect its sovereignty while mobilising developing countries in various international forums against the US’ unilateral moves.

Such an affront to India’s sovereignty is completely unacceptable, said Biswajit Dhar from Council for Social Development.

“The Indian government has done the right thing by not giving in to arm-twisting by the US. It is one of the largest economies and a growing economic power. India needs to mobilise other developing countries at all international forums to fight against the US’ unilateral moves,” Dhar said.

India is not significantly worse off than countries that did sign deals with the US, pointed out Ajay Sriastava from GTRI. “The UK, EU, Japan, Indonesia, and Vietnam now face elevated tariffs, and in return, have given sweeping concessions — zero tariffs on U.S. farm goods, massive investment pledges, and purchases of US oil, gas, and arms. India has made no such concessions,” he said. 

Tariff Limbo

The US was India’s largest export destination in FY25 with shipments valued at $86.51 billion. But it accounted for less than a fifth of its total goods exports of $437.42 billion. 

The 25 per cent tariffs on Indian goods place India at an advantage over countries like Bangladesh, China, Sri Lanka and Cambodia, which, at the moment, face higher tariffs. But without clarity on the quantum of the penalty, Indian exporters and US importers are left with no firm basis to calculate landed costs or assess how the tariff burden can be absorbed, said Ajay Sahai from FIEO.

“With BTA negotiations on, the current impasse may be temporary in nature and we hope and pray that the sixth round of BTA talks in  August will witness a major breakthrough leading to mutually beneficial terms of trade,” said Mithileshwar Thakur, Secretary General, AEPC.

Published on July 30, 2025