Trump Tariffs on India: Trade vs Russian Oil

A new crisis has erupted in India–US relations after the Trump administration imposed tariffs on Indian exports linked to India’s purchases of Russian crude. Meanwhile, India is set to meet about 36-40% of its total crude oil imports from Russian oil in 2024-25, leading to huge energy savings and keeping domestic prices in check.

Now the question is: Will India give up its cheap energy and prioritize the US market, or will it maintain energy security by losing trade benefits?

Why India Relies on Russian Oil

After the Western sanctions on Ukraine, India increased its imports of Russian oil. Now, by January-June 2025, India is meeting about 34% of its total crude oil consumption from Russia, which was less than 2% earlier. In the entire financial year 2024–25, the share of Russian oil in India’s total oil imports reached about 36%, while the share of the Middle East (OPEC) declined to 48.5%.

• Heavy dependence on oil: India imports more than 85% of its total crude oil needs, making the country dependent on global markets for energy security.
• Discount is a big reason for the shift towards Russian crude: After the Ukraine crisis in 2022, Russia sold oil at a huge discount amid Western sanctions. On this occasion, India increased its inclination towards Russian oil. Earlier this share was only less than 2%, but now it has reached about 40%.

Year-on-year savings : 

Year	Part of Russia	Savings (estimated)
FY22–23	23%	$5.1 billion
FY23–24	35%	$7.9 billion

• Resorting to long-term contracts and diversification strategies: Many refiners are ensuring supplies, especially from government term deals (barter annual/long-term contracts) to mitigate any volatility or sudden cuts from Russia. It is not easy to stop such contracts suddenly, so private companies like Reliance, Nayara Energy are continuing to buy.
• Direction of change: Looking for alternative sources: Government refiners like BPCL are now increasing supplies from the Middle East (such as Omani oil), especially in January to make up for the shortage of Russian oil. In addition, the country has started buying oil from 39 countries, earlier this number was 27, ensuring energy security and diversity of options.

Chronology of the Tariff Escalation

The recent tariff dispute between the US and India is not just a trade dispute, but an issue deeply intertwined with geopolitical tensions and energy policy. In July–August 2025, the Trump administration put direct pressure on many of India’s export sectors by raising tariffs in two phases.

1. First blow – 25% “reciprocal” tariff (July 30, 2025) : In an executive order issued from the White House on July 30, 2025, the US administration announced the imposition of a 25% reciprocal tariff. Its rationale was that this duty is being imposed in response to the tariffs imposed by India on some products coming from the US.

• Affected sectors: Categories such as textiles, gems and jewellery, chemicals, pharmaceuticals and shrimp.
• Effective date: From August 1, 2025.

2. Second blow – Additional 25% “penalty” (August 6, 2025) : Another order was issued on August 6, 2025, adding an additional 25% penalty tariff. This was directly linked to India’s continued imports of Russian crude oil, which the Trump administration viewed as “financial support to Russia’s war machine.” The total tariff after this penalty became 50%. 

Effective date : 21 days after the August 6 order, i.e. from August 27, 2025.

3. Exemption for goods in transit : The US made a provision that if the shipment was in transit before the order was issued and arrived on time, it would be exempt from the new tariff.

Date	Action	Outcome
July 30, 2025	25%	First set of punitive duties imposed on India
6 August 2025	Additional 25% penalty (on Russian oil)	Total tariff rate increased to 50%
27 August 2025 (Estimated)	Inclusion of shipments already in transit	Full-scale implementation of tariffs

Comparative Impact: Oil Savings vs Trade Losses

India currently faces a balancing challenge on the one hand, the savings from cheap oil from Russia, and on the other, the threat of nearly 50% tariffs from the US that could hit its key export sectors.

What do the facts and figures say?

• The scale of oil savings : According to an ICRA report, India saved about $5.1 billion by buying discounted crude from Russia in FY23. Another projection suggests that the discounts have enabled annual savings of $7.9 billion in 11 months of FY24.
• The chilling effect of the 50% tariff :Recent reports suggest that the tariffs imposed by Trump could threaten India’s US exports worth about $87 billion. Textiles, jewellery, pharma and petrochemicals critical exports are constantly at risk.
• Oil Import Reduction and 25% tariff hit : Even if India reduces Russian oil imports and only the 25% tariff stays in place, trade losses of up to $8–15 billion are expected.

Impact on US-India trade relations

In early 2025, PM Modi and President Trump set a trade goal called “Mission 500”, seeking to take bilateral trade to $500 billion by 2030. But the Trump administration’s displeasure over India’s oil purchases from Russia brought a wave of tariffs instead a dampener on India-US trade.

1. Tariff policy benefits domestic industry

Tariffs have another side: adding to domestic industries.

The PHD Chamber report shows that 25% tariffs would impact exports worth about $8.1 billion, but the impact on overall GDP would be just 0.19% and on global exports 1.87%, as India’s economy is diversified. In response, the chamber has laid out four-fold strategies:

• Bundle pricing agreements with global retailers (e.g. Walmart, Amazon)
• Development of premium product options
• Expanding trade to new markets (EU, Canada, Latin America)
• Increasing production in the US through on-shore partnerships.

2. India’s strategic positioning in the global market

The tariff dispute has brought about several changes in India’s foreign policy.According to the Financial Times, while the two countries have started off on a positive note in 2025, the trade dispute has dented the Indo-Pacific strategy Quad meetings are in jeopardy, and India’s ties with China-Russia appear to be strengthening. At the same time, a July report by NITI Aayog shows that the tariff structure in the US has given India an advantage over American competitors in 22 key export categories such as electronics and automobiles. Furthermore, while taking over the Chairmanship of BRICS, Prime Minister Modi has proposed to redefine the organization as “Resilience and Innovation”, which brings out India’s multi-pronged strategic strength.

Impact of cheap Russian crude on India and investors

India has imported record-low crude oil from Russia, which has reduced the country’s oil import bill. This is giving the government the benefit of revenue savings and helping in controlling fuel inflation. Its indirect effect for investors is that if petrol and diesel prices remain stable, the operating costs of transport, FMCG and manufacturing companies may reduce. This may lead to margin improvement in the stocks of these sectors and potential growth in stock prices. Brokerage houses are also monitoring this trend so that correct sector-based investment advice can be given to clients.

Conclusion

Buying cheap crude from Russia has been a profitable deal for India. This has kept fuel prices under control and the government’s import bill has also come down. This has reflected in the stock market, especially on oil, gas and shipping companies. But the way forward is not completely clear. International conditions, sanctions and price fluctuations can change the situation. It is wise for investors to think long-term and assess the current global conditions before taking a decision.