U.S. President Trump raises import taxes on India, potentially threatening decades-old relationships
In a surprising turn of events, India's crude oil imports from Russia have remained robust, despite the 25% tariff imposed by the Trump administration on Indian goods in late July 2025. This resilience is a testament to India's strategic energy diversification and pragmatic trade priorities.
According to recent reports, India imported approximately 2 million barrels per day (bpd) of Russian crude oil in August 2025, making Russia the largest single crude supplier, accounting for around 38% of India's total oil imports in that period. This surge in Russian oil imports has contributed significantly to the record-breaking India-Russia bilateral trade of $68.7 billion in the financial year 2024-25, a six-fold increase since before the Ukraine war.
The Trump administration's tariff has not deterred Indian refiners and state entities such as the Indian Oil Corporation from maintaining their purchases of Russian crude. Cargoes booked prior to the tariff announcement have kept supplies steady in the short term, while potential adjustments in trade flows might only become visible after September 2025.
However, challenges persist in logistics and refiners' spot purchases amid mounting US pressure. These challenges could lead to short-term disruptions or volume reductions, particularly in premium Russian crude grades. Yet, India continues to rely heavily on Russian oil as a cheaper alternative to Middle Eastern supplies amid geopolitical tensions in the region.
The potential consequences for India's economy are multifaceted. On one hand, the economic benefits from cheaper Russian crude oil imports reduce India's import costs and support energy security amid global oil market volatility. On the other hand, the trade surplus maintained in India-Russia bilateral trade, with India importing significantly more than it exports to Russia, could create geopolitical balancing considerations due to Western sanctions on Russia.
Moreover, the ongoing trade talks between India and the US are fraught with challenges. A major difference is the US's demand to sell its agriculture and dairy products in India, a politically explosive issue due to the large number of workers engaged in agriculture. This demand has the potential to create future trade and diplomatic friction with the US, which could affect broader India-US economic relations if escalated.
Interestingly, India's relationship with the Trump administration has been strained. Trump has accused India of undermining American efforts to counter Russia's invasion of Ukraine, while Indian analysts have accused the US of double standards for continuing to trade with Russia while punishing other countries for doing so. The U.S. might be using India's vulnerability as a bargaining chip in its ongoing trade negotiations.
In a different context, there is a disagreement over who played a role in arranging a ceasefire between India and Pakistan, with Trump claiming he did and India insisting its military prowess forced Pakistan into the ceasefire. While Pakistan has profusely thanked Trump and even offered to nominate him for a Nobel Peace Prize, India has not acknowledged Trump's role.
In conclusion, India's trade with Russia remains resilient despite the US tariff threat. However, sustained US tariffs could pressure India to further diversify its trade partners or adjust crude sourcing policies over the medium term. The ongoing trade talks between India and the US promise to be a complex and challenging negotiation, with both parties holding firm to their respective positions.
- In the realm of defi and finance, India's credit balance has seen a boost due to the record-breaking India-Russia bilateral trade of $68.7 billion in the financial year 2024-25.
- Amidst the general news of India's robust crude oil imports from Russia, the Indian Oil Corporation and other refiners have maintained their credit purchases of Russian crude.
- The economic consequences for India are complex, as cheaper Russian oil imports balance the nation's budget, but the trade surplus could trigger ESG considerations due to Western sanctions on Russia.
- In the midst of challenges in logistics and refiners' spot purchases, the ongoing war-and-conflicts in the Middle East drive India to heavily rely on Russian oil as a cheaper alternative.
- The policy-and-legislation standoff between India and the US over agricultural trade poses potential conflicts, could create trade and diplomatic friction, and have far-reaching impacts on India-US economic relations.
- In politics, the strained relationship between India and the Trump administration continues, with India accused of undermining US efforts in Ukraine, and the US using India's vulnerability as leverage in trade negotiations.
- Outside of the business and finance realms, a disagreement over who arranged a ceasefire between India and Pakistan sparked debate, with Pakistan nominating Trump for a Nobel Peace Prize, while India did not acknowledge Trump's role in the matter.
