Trump Tariffs on India: Choose US Trade or Keep Russian Oil?

India is facing a major economic challenge. The country is under pressure from the United States to reduce its imports of Russian oil. Miffed by India’s decision to import from its adversary Russia, the US has imposed new tariffs on Indian goods. This puts India in a difficult position: protect its energy security through cheap Russian oil or safeguard its growing trade with the US.

Let’s break down with this blog what these measures mean for India, the key sectors affected, and how the two choices stack up against each other.

Why India Depends on Russian Oil

India imports over 85% of its crude oil needs. Since 2022, it has increased its reliance on Russia because of the discounts offered on crude. Before the Ukraine war, Russian oil made up less than 2% of India’s imports. Today, that figure is close to 40%. This discount has helped Indian refiners.

(Source: ICRA, Nikkei Asia, Economic Times)

How the US Responded to India’s Russian Sway

On July 30, 2025, US President Donald Trump signed an executive order imposing a 25% tariff on Indian goods. On August 6, another 25% tariff was added, bringing the total tariff on Indian exports to 50%. This is the highest tariff level the US has imposed on any country along with Brazil.

(Source: Office of the US Trade Representative)

The US claims that these tariffs are justified on national security grounds. In this case, Washington argues that India’s continued imports of Russian oil indirectly support a country engaged in an active conflict, which the US sees as undermining global stability and its own strategic interests. 

Tariff Losses vs Oil Savings

Let’s compare the savings from Russian oil to the losses India could face due to US tariffs.

Source: Office of the US Trade Representative, Trading Economics

(Tariff cost based on FY24-25 exports; oil savings based on FY22-25 average). 

Giving in to the US pressure would lose India the oil advantage while there is no guarantee that tariffs will go down if India agrees to the US. Moving away from numbers for a bit, this decision is far more than a simple cost/benefit scenario. This conundrum that India finds itself in has broader geopolitical implications. It forces India to choose between a long term ally and a country who has no allies or friends but “interests”. 

India’s Official Response to Trump’s Tariff Tantrum

India has called the US tariffs "unfair and unjustified." It maintains that oil imports are a commercial decision made to ensure stable fuel prices and meet the needs of 1.4 billion people.

India has also notified the World Trade Organization (WTO) about its objections and is considering retaliatory tariffs. However, with the WTO’s appeals process currently inactive, legal options are limited.

India argues that the US has not imposed similar penalties on other countries that continue trading with Russia, including EU members like Germany, France and others. This raises concerns about unequal treatment.

What is at Stake for India?

This issue goes beyond just trade or oil as it affects India's broader economic and strategic interests.

India’s long-standing policy of strategic autonomy and multi-alignment, which aims to maintain balanced ties with global powers like the US, Russia, and others is now being tested. The pressure to choose between economic ties with the US and energy cooperation with Russia puts India in a tough spot diplomatically and economically. 

On one hand, discounted Russian oil supports India’s domestic economy by helping control inflation and securing long-term energy needs. On the other, a strong trade relationship with the US supports millions of Indian jobs and is vital for key export sectors.

As global tensions rise, India is being drawn into a geopolitical contest where remaining neutral is becoming harder. Any shift in India’s position could have ripple effects, not just for fuel prices or exports, but for its global alliances, foreign policy credibility, and long-term growth outlook.

Possible Outcomes of the Russian Oil-US Tariff Choice

• Diplomatic Resolution: India may negotiate a reduction in oil imports to secure partial tariff relief.
• WTO Dispute: India could escalate the matter internationally, though results may be delayed.
• Energy Diversification: Indian refiners may increase reliance on non-Russian suppliers.
• Export Diversification: India may shift focus to EU, ASEAN, and Middle Eastern markets.

Officials suggest the 21-day gap before the second tariff hike is an opportunity for both countries to find common ground. Talks may continue in the coming weeks.

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