S B Asthana

An Oil Shockwave from Washington

On October 22, 2025, President Donald Trump of the United States slapped broad sanctions on the two biggest oil producers in Russia, Rosneft and Lukoil, together contributing for almost half of Russia's 4 million barrels per day (bpd) of seaborne crude exports with a threat that US is "prepared to take further action if necessary to end Russia Ukraine war." These actions specifically target Moscow's "war machine" funding for the conflict in Ukraine.

It follows months of US pressure, including 50% tariffs on Indian goods imposed in August 2025 specifically for Russian oil purchases, and threats of up to 100% tariffs on both India and China. Justified by Trump as retaliation for India’s “far too high” tariffs and “strenuous and obnoxious non-monetary trade barriers,” initially, and later purchase of Russian oil by India as ‘Security threat to America’, these moves have severely disrupted an expanding trade partnership.

The secondary tariff on nations dealing in Russian oil—especially damaging for India, which sources around 35% of its crude from Russia. These measures risk entangling trade, energy security, and defence in a complex geopolitical crossfire. This opinion piece analyses the implications, the current trade dynamics, the potential sectoral impact, and India’s strategic responses.

India–U.S. Trade Snapshot

India is the U.S.'s ninth-largest trading partner, and the U.S. is India’s largest export destination. In 2024, bilateral trade (per Indian sources) stood at $136.7 billion—with India exporting $91.2 billion and importing $45.5 billion, yielding a $45.7 billion surplus for India. U.S. data shows bilateral goods trade at $129.2 billion, with exports to India at $41.8 billion and imports from India at $87.4 billion. This trade imbalance remains a sore point for Washington. While Trump has dubbed India the “tariff king,” the actual weighted average tariff on U.S. imports is under 5%, well within WTO limits.

India’s major exports to the U.S. in 2024 included electrical and electronic equipment ($14.4 billion), pharmaceuticals ($12.73 billion), and precious metals and stones ($11.88 billion). Conversely, U.S. exports to India comprised mineral fuels ($12.6 billion), precious stones ($5.31 billion), and machinery ($3.29 billion), along with soybeans ($2.2 billion).

From India’s perspective, the U.S. administration has ignored the significant American advantage in India’s services and education sectors. Furthermore, India’s obligations to safeguard farmers’ livelihoods, sensitivities regarding dairy products, ensure energy security, and maintain affordability restrict its capacity to yield to U.S. expectations.

Fallout of 50% Tariff and Proposed New Sanctions

The 50% tariff raises average duties on Indian goods, affecting key sectors such as auto parts, electronics, steel, and aluminium. Even iPhones assembled in India may see price hikes. Projections suggest a 10% to 50% drop in Indian exports in these sectors—amounting to annual losses of up to $3 billion.

India, with 1.4 billion people and the world’s fourth-largest economy, aims to double trade with the U.S. to $500 billion by 2030. However, Trump’s tariffs threaten this goal, potentially trimming 0.3–0.5% off India’s projected 6.5% GDP growth for 2025 (as per HSBC) and 6.6% by IMF this year. With oil sanctions India could lose $4-5 billion and add on two percent in its import bill.

For U.S. consumers, these tariffs will spark inflation, especially in healthcare affordability. Tariff revenues—estimated to constitute 5% of federal income in 2025—are intended to offset Trump’s tax cuts and support domestic manufacturing. The crude oil has gone beyond $60 per barrel and very soon breach $70 mark. Yet economists, including J.P. Morgan, predict a U.S. GDP slowdown to 1.6% and supply chain disruptions, given India’s crucial role in supplying generics, pharmaceuticals, and electronics. Currently the inflation rise is under control because adequate hoarding has been done by US traders before deadlines of the tariffs, but it will soon show impact like fuel cost will start impacting everyone very soon. The oil embargo has strained relations between Russia and US, putting ideas of economic cooperation out of gear for the time being.

Strategically, these tariffs risk alienating a key Indo-Pacific partner, undermining U.S. efforts to counter China. The punitive measures could push India closer to the Russia-China-India (RIC) alignment to take on imminent tariff challenge posed by President Trump. China has also intensified the trade war although it seems making some accommodation in seabound oil import from Russia.

India imported $40 billions of Russian oil in 2024 (forming 35% of India’s energy imports). The new sanctions would spike India’s import bill, increase inflation, strain fuel subsidies, and derail fiscal targets—especially problematic in an election year. In defence, India’s 36% dependency on Russian arms (down from 55% in 2019) makes it vulnerable to U.S. sanctions, particularly regarding high-value systems like the S-400. While compliance compromises strategic autonomy, non-compliance risks further penalties.

The recent sanctions have exposed unreliability and hypocrisy of USA under Trump to rest of the world. While U.S. continues to buy Russian nuclear fuel, fertilizers and important minerals, it accuses others of funding Russian war machinery.  Given the perceived unreliability of U.S. foreign policy, India may be inclined to take calculated risks besides being open to some accommodation in some issues.

A Web of Sticking Points

Agriculture is India’s red line. U.S. demands greater access to India’s protected agricultural market, particularly in dairy and grains. But with 45% of the population reliant on farming, India faces high political costs in liberalizing this sector.

India is unlikely to emulate U.S. allies like Japan or the EU in offering zero-tariff concessions, owing to security dependencies. Indian exports of auto parts, steel, aluminium, and electronics face the steepest tariffs. Less-affected sectors like textiles and gems may still lose market share to Vietnam and Bangladesh. In retaliation, India could target U.S. exports such as soybeans and aircraft—although this could impact its aviation sector if the U.K. cannot meet shortfalls.

Domestic Compulsions in India’s Trade Strategy: The Inflexible Realities

India’s trade policy is constrained by domestic politics. Any concessions on agriculture risk electoral backlash, especially in a pre-election year. MSMEs, which drive Indian exports, would be severely impacted by higher U.S. tariffs. Energy security remains paramount, and Russian oil provides affordable options not easily replaceable.

Strategic autonomy underpins India’s foreign policy. Aligning too closely with either Washington or Moscow would compromise this balance. Given Trump’s recent policy unpredictability, abandoning a reliable partner like Russia seems unjustified.

India’s Balancing Act: Strategic Options

Trump’s tariff blitz leaves India with limited but critical choices. These include:

Negotiate a Selective Trade Deal:  India may pursue a limited deal, lowering tariffs on non-sensitive imports like machinery, liquor, hydrocarbons, motorbikes, and soybeans—while resisting U.S. demands on agriculture and dairy. It must stand firm on energy affordability for its vast poor population. Temporarily, the affected oil refiners are "recalibrating" imports companies are working to find alternatives with their cost benefit analysis. Reliance stating alignment with government guidelines and state firms auditing paperwork to avoid direct Rosneft/Lukoil exposure.

India should absorb the tariffs temporarily without rushing into a disadvantageous deal as Indian Commerce Minister has indicated “We don’t do deal with gun on our head”. It should protect MSMEs, prioritize growth, and wait out the 10-day deadline on secondary tariffs, monitoring U.S.–China negotiations. This appears to be the most prudent approach.

Diversify Markets:  India should expand exports to ASEAN, the EU, and Africa. Deepening ties with BRICS nations can also cushion the impact. Though these markets lack the scale of the U.S., diversification reduces dependency and future coercion risks. Aggressive pursuit of FTAs and strategic partnerships is essential.

Strategic Reduction in Russian Trade:  India can gradually diversify oil imports to the Middle East or the U.S., and broaden arms sourcing to France, Israel, and others. However, higher costs and strong Russia ties complicate this transition. India can redirect exports to ASEAN, the EU, and Africa, though with smaller profit margins.

Self-Reliance:  Strengthening the Atmanirbhar Bharat campaign for defence and tech manufacturing is vital. Past disruptions, like COVID, have shown India’s capacity to localize supply chains—a trend that must accelerate. The GST reforms executed by India increased domestic consumption balanced out trade losses of tariffs to some extent, but India’s aggressive campaign of using ‘Swadeshi’ consumer goods will have to continue. 

Controlled Retaliation:  If unavoidable, India must retaliate proportionately with tariffs on high-profile U.S. goods like aircraft, oil, whiskey, and motorcycles. Such a move risks escalation but may be necessary to defend sovereignty and prevent future coercion.

BRICS: Can It Pose a United Front to the U.S.?

BRICS nations face similar U.S. tariffs—34% on China, 50% on Brazil. The concept of a coordinated BRICS response is attractive but lacks momentum. India-China rivalry and Russia’s economic constraints limit cohesion. While alternate payment systems (e.g., rupee-ruble trade) are being explored, intra-BRICS trade ($700 billion) pales in comparison to their $5 trillion trade with the U.S.

However, if Trump follows through with 100% tariffs on BRICS and 500% on countries trading with Russia, he may inadvertently force BRICS closer than never before. This could catalyze a realignment toward the RIC format and coordinated response. It needs to be noted that so far, on new oil sanctions Germany has asked for waiver not China or India, which indicates the determination of both these countries to fight out unjustified tariffs and coercive trading.

Realistic Road Ahead: Strategic Patience Without Compromising National Interest

India’s optimal response blends diplomacy, economic recalibration, and strategic signalling. A selective trade deal protecting sensitive sectors while retaining competitiveness is key. Simultaneously, India must diversify exports, reduce reliance on Russian oil and arms incrementally, and boost domestic manufacturing.

Subsidies for impacted exporters and tax relief for MSMEs can cushion the blow. By reinforcing its role as a democratic counterweight to China, as many lawmakers in USA argue, India can retain geopolitical leverage while defending long-term interests.

Trump’s coercive tariffs and trade policies affect most of the world besides US itself. It has made US unreliable partner for everyone, besides risking trade isolation as rest of the world is trying to work out a trade options avoiding unpredictable USA under Trump. However, US inflationary and domestic pressure is still within tolerable limits for Trump Administration but it is sure to increase enough to revisit his policies soon. Regarding Russia Ukraine War being stopped by the tariffs or long range standoff attacks is unlikely. It will significantly weaken Russian economy, cause more destruction of Ukraine & Russia, but is unlikely to make major impact on the situation on frontline.

Trump’s tariff offensive poses serious challenges—but India possesses considerable leverage. Through smart negotiation, diversification, and strategic patience, India can weather the storm and emerge stronger, with a more resilient and self-reliant economic framework. Diplomacy, reform, and national resolve will be India’s guiding tools in navigating this turbulent phase.

(The views expressed are personal views of the author, who retains the copy right). The author can be reached at Facebook, LinkedIn, as Shashi Asthana, @asthana_shashi on twitter, and personnel sitehttps://asthanawrites.org/email shashiasthana29@gmail.comLinkedIn Profilewww.linkedin.com/in/shashi-asthana-4b3801a6 Youtube link https://www.youtube.com/channel/UCl50YRTBrOCVIxDtHfhvQDQ?view_as=subscriber