The US-India relationship faces fresh challenges in 2025 as the United States imposes steep tariffs on Indian imports. These measures come amid Washington’s demand that India reduce its purchase of Russian crude oil. This geopolitical move threatens to reshape trade, energy security, and the broader Indo-Pacific strategic partnership.
Current Tariff Measures and Trade Volume
The US has already applied a 25 per cent tariff on many Indian goods. Another 25 per cent tariff is pending unless India halts Russian oil imports. Together, these could total 50 per cent. In 2024, bilateral trade in goods and services reached $212.3 billion. Goods trade alone was $128.9 billion, with India exporting $87.3 billion to the US and importing $41.6 billion. Services trade accounted for $83.4 billion. The trade relationship spans pharmaceuticals, textiles, machinery, software, and IT services.
Impact on Key Sectors
Consumer goods like apparel, footwear, and jewellery face immediate price hikes. Indian jewellery exporters rushed shipments before tariffs intensified. Pharmaceuticals, a critical sector supplying 40-50 per cent of US generic drugs, will see cost increases affecting insurers and patients. Electronics and components may experience order delays or shifts to Southeast Asia. US exports to India, including aircraft parts and agricultural inputs, risk retaliation if tensions escalate.
India’s Energy Dependence on Russia
Russia supplies 35 per cent of India’s crude oil, about 1.75 million barrels per day. India argues this is essential for price stability and energy security. Unlike US sanctions on Iran or Venezuela, Russian oil is not under a direct embargo, complicating the US demand. Refinery adjustments to substitute Russian crude with Gulf or US grades are technically complex and contractually difficult.
Strategic and Geopolitical Stakes
The tariff dispute signals a shift from trade issues to broader geopolitical leverage. The US links tariffs to India’s alignment on Russia policy, testing the strategic partnership. India views energy choices as pragmatic, not political. This strain risks weakening the Quad alliance and undermines supply-chain realignments aimed at countering China. A prolonged tariff conflict could erode India’s appeal as a manufacturing hub alternative to China.
Possible Paths to Resolution
Potential solutions include time-bound tariff waivers on critical medicines and industrial inputs. The US could accept a phased reduction in Russian oil imports by India. A limited trade deal might emerge, combining tariff relief with energy policy flexibility, framed as mutual security cooperation. Such off-ramps would ease economic pain and preserve the Indo-Pacific strategic balance.
Broader Implications for Global Trade and Security
This dispute exemplifies how economic tools are used to enforce geopolitical goals. It marks the complexity of balancing national interests with global alliances. The situation puts stress on the vulnerability of interconnected supply chains and the importance of diplomatic negotiation in sustaining long-term partnerships.
Questions for UPSC:
- Discuss in the light of US-India trade tensions, how economic sanctions affect international diplomatic relations and global supply chains.
- Critically examine the role of energy security in shaping foreign policy decisions of emerging economies like India.
- Explain the strategic significance of the Indo-Pacific region and how bilateral disputes between major democracies impact regional security architecture.
- With suitable examples, discuss the challenges and opportunities in balancing economic interests and geopolitical alignments in contemporary global trade.
