President Donald Trump issued an executive order Wednesday to place an additional 25% tariff on India over its imports of Russian oil, bringing the combined duties imposed by the United States on its ally to 50%.
The additional tariffs mean India will face the highest levy along with Brazil, putting it at a significant disadvantage against regional competitors such as Vietnam and Bangladesh.
The duties would go into effect 21 days after the signing of the order, meaning that both India and Russia might have time to negotiate with the Trump administration on the import taxes.
The move threatens to further complicate U.S.-Indian relations and comes shortly after an Indian government source said Prime Minister Narendra Modi would visit China for the first time in over seven years later this month.
The total rate will be a "big negative for Indian exports," said A Prasanna, head of research at ICICI Securities Primary Dealership.
"Many Indian exports will face a handicap versus countries that are in the 15%-30% bucket," Prasanna said.
First signaled by Trump on Monday, the order follows meetings by Trump's top diplomatic envoy Steve Witkoff in Moscow aimed at pushing Russia to agree to peace in Ukraine.
Trump has threatened higher tariffs on Russia and secondary sanctions on its allies if Russian President Vladimir Putin does not move to end the war in Ukraine.
As the pressure mounts, India may agree to significantly reduce Russian purchases in a phased manner and diversify to other sources, said Teresa John, an economist at Nirmal Bang Institutional Equities, a Mumbai-based brokerage.
Trump's moves could scramble the economic trajectory of India, which until recently was seen as an alternative to China by American companies looking to relocate their manufacturing. China also buys oil from Russia, but it was not included in the order signed by the Republican president.
As part of a negotiating period with Beijing, Trump has placed 30% tariffs on goods from China, a rate that is smaller than the combined import taxes with which he has threatened New Delhi.
Trump had previewed for reporters on Tuesday that the tariffs would be coming, saying the U.S. had a meeting with Russia on Wednesday as the Trump administration tries to end the war in Ukraine.
"We're going to see what happens," Trump said about his tariff plans. "We'll make that determination at that time."
The Indian government on Wednesday called the additional tariffs "unfortunate."
"We reiterate that these actions are unfair, unjustified and unreasonable," Foreign Ministry spokesperson Randhir Jaiswal said in a statement, adding that India would take all actions necessary to protect its interests.
Jaiswal said India has already made its stand clear that the country's imports were based on market factors and were part of an overall objective of ensuring energy security for its 1.4 billion people.
Ajay Srivastava, a former Indian trade official, said the latest tariff places the country among the most heavily taxed U.S. trading partners and far above rivals such as China, Vietnam and Bangladesh.
"The tariffs are expected to make Indian goods far costlier with the potential to cut exports by around 40%-50% to the U.S.," he said.
Srivastava said Trump's decision was "hypocritical" because China bought more Russian oil than India did last year.
"Washington avoids targeting Beijing because of China's leverage over critical minerals which are vital for U.S. defense and technology," he said.
In 2024, the U.S. ran a $45.8 billion trade deficit in goods with India, meaning America imported more from India than it exported, according to the U.S. Census Bureau. American consumers and businesses buy pharmaceutical drugs, precious stones and textiles and apparel from India, among other goods.
At the world's largest country, India represented a way for the U.S. to counter China's influence in Asia. But India has not supported the Ukraine-related sanctions by the U.S. and its allies on Moscow, even as India's leaders have maintained that they want peace.
The U.S. and China are currently in negotiations on trade, with Washington imposing a 30% tariff on Chinese goods and facing a 10% retaliatory tax from Beijing on American products.
The planned tariffs on India contradict past efforts by the Biden administration and other nations in the Group of Seven (G-7) leading industrialized nations that encouraged India to buy cheap Russian oil through a price cap imposed in 2022. The nations collectively capped Russian oil a $60 per barrel at a time when prices in the market were meaningfully higher,
The intent was to deprive the Kremlin of revenue to fund its war in Ukraine, forcing the Russian government either to sell its oil at a discount or divert money for a costly alternative shipping network.
The price cap was rolled out to equal parts skepticism and hopefulness that the policy would stave off Putin's invasion of Ukraine.
The cap has required shipping and insurance companies to refuse to handle oil shipments above the cap, though Russia has been able to evade the cap by shipping oil on a "shadow fleet" of old vessels using insurers and trading companies located in countries that are not enforcing sanctions.
But oil prices have fallen, with a barrel trading on Wednesday morning at $65.84, up 1% on the day.
