After five rounds of talks, what was expected to be a quick trade deal has stalled. The disputes are foundational, centering on U.S. demands for greater access to India’s large farm and dairy markets, and a more contentious point: India’s continued purchase of Russian oil.
If India and the U.S. don’t reach a trade deal in the next three weeks, President Donald Trump plans to raise taxes on goods coming from India to 50%. This move would not just hurt India badly by making its exports prohibitively expensive; it would signal a fundamental rupture in a critical strategic partnership.
The Sticking Points
After five rounds of talks, what was expected to be a quick trade deal has stalled. The disputes are foundational, centering on U.S. demands for greater access to India’s large farm and dairy markets, and a more contentious point: India’s continued purchase of Russian oil.
India has strongly opposed the 50% tariff threat, which could virtually halt bilateral trade. While officials in New Delhi still hope private talks can de-escalate the situation, the public stance is hardening. As of Thursday, Prime Minister Narendra Modi, without naming the tariffs, declared he was ready to “pay a heavy price” to protect the interests of India’s farmers and dairy industry.
There is some room for negotiation. Indian officials have signalled a willingness to reduce taxes on some U.S. farm products, like almonds and cheese. But the pressure on its sovereign energy policy is another matter. India, the world’s third-largest oil consumer, has leaned heavily on Russia, its long-time defence partner, for discounted crude since 2022.This US pressure is already having a tangible and damaging effect.
Recent reports indicate that Indian state-run refiners have paused spot purchases of Russian oil as discounts shrink and US pressure mounts. This pressure strikes at the heart of India’s refining industry.For instance, Reliance Industries, the country’s largest refiner, has built a core part of its strategy on this trade, importing over 4 lakh barrels of Russian oil per day—more than a third of its total intake—at a significant discount of $3-4 per barrel compared to other regular sources. This highly profitable arrangement is now under direct threat. Following the EU’s decision on Monday to ban refined oil products originating from Russia, Reliance saw its shares fall over 3%. The drop wiped out a staggering ₹66,000 crore from its market value, a stark warning of this conflict’s financial cost.
A Forced Pivot to New Allies
Faced with such unilateral pressure, India is predictably reinforcing its ties with other nations, feeling the heat. Along with India, Brazil is another major target of Trump’s tariffs. Both are founding members of the BRICS group. Brazilian President Luiz Inácio Lula da Silva told Reuters he would be calling Prime Minister Modi, followed by China’s Xi Jinping, to coordinate a response.
This is not just talk. India is actively working more closely with Russia and China. High-level diplomatic visits to Moscow and Beijing have increased, focusing on defence and strategic partnership. After years of tension, Prime Minister Modi is expected to visit China in a few weeks for a regional security summit—his first trip since 2018—where he could meet with both President Putin and President Xi. The message is clear: if Washington insists on treating India as a subordinate rather than a partner, New Delhi will cultivate its other options.
What India Stands to Lose
Should talks collapse, the stakes are immense. In the last financial year, India exported about $87 billion worth of goods to the U.S., from medicines and jewellery to petrochemicals, accounting for nearly 2% of India’s GDP.
If the 50% tariff is applied, most of that trade would evaporate overnight. Beyond goods, the tension threatens to spill over into the services sector and impact work visas for the tech professionals who form a key part of the India-U.S. relationship. The outsourcing industry, long a pillar of India’s economy and a point of criticism in the U.S., would face an existential threat.
In essence, the tariff is more than a tax; it is a weapon aimed at the heart of the modern Indian economy and its relationship with the West.
(The author of this article is a Defence, Aerospace & Political Analyst based in Bengaluru. He is also Director of ADD Engineering Components, India, Pvt. Ltd, a subsidiary of ADD Engineering GmbH, Germany. You can reach him at: [email protected])
(Disclaimer: The views expressed above are the author’s own and do not reflect those of DNA)
