Trump's Tariff: How Will Modi and India Survive This Challenge?

Trump’s Tariff Pushes Strain Between Washington and New Delhi

US President Donald Trump has slapped an additional 25 percent tariff on Indian imports, raising the total tariff to 50 percent—one of the highest he has imposed on any country after Brazil. In Brazil’s case, Trump has shown visible antagonism toward the Lula government for arresting his ally, former President Jair Bolsonaro.

However, the reasons behind the tariffs on India are different. According to informed diplomats, the move is not due to India buying Russian oil—purchases that were, in fact, encouraged by the Biden administration in an effort to stabilise the global energy market. Indian business houses, such as Reliance, refined Russian Ural light crude and resold it to the US and European countries—clearly with a significant markup. The lack of objections from Western powers suggests that they were complicit in this arrangement alongside the Biden administration.

After returning to the White House, Donald Trump not only threatened India over its continued purchase of Russian oil but also pressured it to exit BRICS, an emerging alliance that has positioned itself as an anti-US bloc by advocating de-dollarisation and backing the New Development Bank. While these demands are extreme, it is notable that other BRICS countries have not faced the same level of punitive action as India.

Trump's Tariff: What's Causing the Strain in Ties?

This raises an important question: What has gone wrong between President Trump and his once-friendly counterpart, Indian Prime Minister Narendra Modi?

One widely accepted reason for the current diplomatic strain is India’s refusal to credit President Trump with averting war between nuclear-armed neighbours India and Pakistan. While Pakistan’s Field Marshal Asim Munir publicly supported Trump’s nomination for the Nobel Peace Prize, India insisted that the de-escalation was achieved independently and without any US mediation. According to senior foreign ministry officials, US negotiators had even offered to lower tariffs if India endorsed Trump’s role in preventing war. India declined this offer, believing that:

1. Acknowledging third-party mediation would damage its image as a regional power.

2. Accepting US intervention would set a precedent limiting India’s strategic autonomy.

Another theory, put forth by a senior foreign diplomat familiar with global power dynamics, suggests that the US is seeking to weaken the influence of Indian business oligarchs like Adani and Ambani. The aim is to open up restricted sectors—such as agriculture and pharmaceuticals—to American companies under the guise of “reform”.

As a result of these tensions, India has been hit with a 25 percent additional increase under Trump’s tariff. Trump has further threatened to impose more duties if India does not cease its engagement with Russian oil companies. This stance, however, is riddled with contradictions. While Reliance’s Jamnagar refinery has reportedly stopped buying Russian Ural crude, Indian public sector oil companies have also reduced imports, allegedly after Trump’s tariff threats during the Indo-Pakistan standoff.

Yet Trump continues to issue conflicting statements—claiming India is still buying Russian oil—raising the question of whether he has fully grasped the current trade scenario. Meanwhile, the Indian ambassador to Russia has clearly stated that India will purchase oil from any country offering the lowest price.

Trump’s Tariff Fuels Layoffs and Economic Risks

The ongoing uncertainty suggests that both nations will need to navigate multiple diplomatic and economic challenges before reaching any resolution.

In the meantime, Trump's tariffs are beginning to severely impact India’s export sector. Coimbatore and Tiruppur—both major textile hubs—have experienced significant layoffs. One textile entrepreneur, who owns 13 factories in India and abroad, told this writer that he has already laid off 50 percent of his workforce, with the remainder at risk if the situation isn’t resolved within a few months.

Although China has offered market access to Indian companies affected by these job losses, no alternative can match the scale and profitability of the US market. Some American officials have even referred to Trump's tariff as “sanctions,” suggesting that they are intended to cripple India’s economy. If the situation escalates, it could result in millions of job losses and a sharp decline in foreign investment.

This leads to a final, crucial question: Why is the US reluctant to impose similar tariffs on China—another major buyer of Russian crude and a core member of BRICS?

The answer lies in China’s economic significance. It is the world’s manufacturing hub and a key supplier of rare earth metals essential for electric vehicles and electronic devices. India, by contrast, has little leverage—aside from its large consumer market and a trove of data from 1.4 billion citizens.