US president Donald Trump has imposed a sweeping 50% tariff on Indian exports to the United States, accusing New Delhi of indirectly funding Russia’s war in Ukraine through its continued purchases of discounted Russian oil. The move marks one of the sharpest blows to US-India relations in decades and has already triggered financial turmoil in India’s markets.
Tariff shock hits Indian exports
The measure, which came into effect on Wednesday, applies to the majority of Indian goods entering the US market, covering industries from textiles and jewellery to seafood and leather. Analysts estimate that the tariffs could slash Indian export volumes to the US by up to 40%, disrupting a trade flow worth nearly $90bn annually.
The Indian rupee fell to a record low against the dollar on the announcement, while domestic equities also dropped sharply, underscoring investor concern over the scale of the disruption. Sectors reliant on US demand, particularly micro, small and medium-sized enterprises, are expected to bear the brunt of the shock.
Washington’s justification
The White House argued that India’s growing reliance on Russian oil purchases — now estimated at more than 40% of its crude imports — amounts to indirect support for Moscow’s war machine. “By buying Russian oil, India is helping fund the destruction of Ukraine,” Trump said, framing the tariff as both punitive and corrective.
India’s response
Prime minister Narendra Modi’s government condemned the decision as “arbitrary and unfair,” vowing to maintain energy purchases from Russia for economic reasons. Officials signalled that India would accelerate efforts to diversify its export markets and reduce exposure to US trade policy. At the same time, emergency fiscal measures are being considered to stabilise the rupee and support affected industries.
Strategic backlash feared
Experts warn the tariffs could backfire by undermining a crucial US partner in Asia. India has been a central player in the Quad security grouping alongside the US, Japan and Australia. By alienating New Delhi, Washington risks pushing India closer to Russia and China, potentially weakening efforts to counter Beijing’s influence in the Indo-Pacific. Diplomats described the move as an “own goal” that may strain strategic trust for years to come.
Outlook
While India is unlikely to capitulate on energy purchases, the tariffs create new pressure on its export-dependent sectors and raise questions about the durability of the US-India partnership. Any attempt at de-escalation may hinge on upcoming diplomatic exchanges at the UN General Assembly in September, though both sides are currently adopting hardened positions.
REFH – Newshub, 27 August 2025
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