India’s international trade is in turmoil as never before. The 50% tariff on Indian exports imposed by the US administration is beginning to bite. And Donald Trump continues to add confusion, claiming Prime Minister Modi has agreed to taper off purchases of Russian oil.
India's goods exports to the U.S. fell precipitously from $8.8 billion in May 2025 to $5.5 billion in September, marking a 37.5% drop over the four-month period. The impact of these over-the-top US duties is worse than it seems, as it has hit the small, labour-intensive industries the hardest. These include textiles, gems and jewellery, leather and engineering goods.
The 50% tariffs were implemented in two stages. The ‘reciprocal tariff’ was imposed on Indian goods on 7 August, and an additional 25% levy on 27 August in retaliation against India continuing to buy Russian oil.
The drop in exports has also negatively impacted India's trade deficit - the gap between what we import and export - by widening to a 13-month high of $32.15 billion in September.
The logjam in trade negotiations between Indian and the US has, in the last few months, been dominated by the US’s insistence that India, being the second largest importer of seaborne oil from Russia, is funding the latter’s Ukraine war; and this should stop if India wants easier access to US markets.
Trump’s bombshell
Then came the bombshell on Wednesday. Donald Trump told White House reporters that India had agreed to taper off energy purchases from Russia. In a quick response, the Ministry to External Affairs (MEA) spokesperson, Randhir Jaiswal, denied any such conversation, stating that the last telephonic communication between Trump and the Indian PM had been on 9 October.
In a polite but firm assertion, he reiterated India is “broad-basing our energy sourcing and diversifying as appropriate to meet market conditions.”
What is the truth? Donald Trump is not great about dates or specifics, though he told reporters that the message of India stopping Russian crude imports was delivered through US’ newly appointed ambassador to India, Sergio Gor. Trump repeated his claim when meeting Ukraine’s President Zelensky later on Saturday.
“Well, India is not going to be buying Russian oil anymore,” the US President said.
Numerous US officials have made it clear that buying Russian crude is a US red line. Treasury Secretary Bessent accused India of "profiteering" from the Ukraine war by buying discounted Russian crude, refining it, and reselling it to other countries. Peter Navarro, White House’s Trade Adviser, called India an "oil money laundromat for the Kremlin". So is India going to cave in and stop Russian energy imports?
What do the statistics show? Russia continues to be the largest exporter of crude to India, though the latter has over the months tried to strike a balance by increasing US crude purchases.
From a negligible 1.7% in 2019–2020, Russia's share of India's oil imports soared to as high as 40% during fiscal 2023–24 after Moscow offered deep discounts to fund its Ukraine offensive.
There was a marginal drop in this year’s July-September quarter, but in October there was again a rebound. Russia contributes 34% to India’s crude imports, and continues to be the largest supplier.
Which way forward?
A Reuters report said though White House officials had claimed Indian refiners were already cutting Russian imports by 50%, the Indian government had not pressed for any such cuts.
Refiners have already placed orders for November loading, including some cargoes for December arrival, so any cut could be visible in December or January import numbers. In fact, India's imports of Russian oil are set to rise about 20% this month to 1.9 million barrels per day, according to estimates from commodities data firm Kpler.
There are, however, reports that, though there is no official communication to state-owned refiners Indian Oil and others, there is informal signalling to taper off Russian purchases. This may become evident in days to come.
Russia, meanwhile, is pushing hard and defending India’s ‘sovereign’ right to buy what is cheapest. It has also been emphasised that India not cave in as it could impact defence relations as most of India’s arms and weaponry is of Russian origin. A few days ago, Russian Ambassador to India Denis Alipov underlined this ‘polite threat’ saying: “For more than six decades, uninterrupted cooperation in defence has served as the backbone of India's armed forces.”
When the US imposed the 50% tariffs in August, Prime Minister Modi rushed to balance his options by seeking stronger ties with both Vladimir Putin and by making a special trip to China to meet Xi Jinping. The demonstration of independence was not lost on Donald Trump, but then he characteristically upped his threats.
There are three significant factors at play: First, India desperately needs a trade deal with the US and an end to the backbreaking tariffs; second, the Trump administration does not appreciate ‘balancing’ diplomacy and wants total capitulation.
Witness Donald Trump’s lashing anger at India taking the presidency of the BRICS alliance. Third, there seems to have been some assurances given by India on rolling back Russian oil imports. This writer’s hunch is that it will be seen in the coming days.
Indeed, India is in an unenviable snarl, and maybe it has decided to move the U.S. way.
