The US government imposed additional tariffs on Indian imports linked to Russian oil in 2025. This move followed earlier reciprocal tariffs and has raised concerns about fairness and economic impact. India’s growing export dependence on the US market makes these tariffs for its economy.
Background of US Tariffs on India
Recently, the US imposed a 25% additional duty on Indian imports connected to Russian oil. This followed a 25% reciprocal tariff that started earlier the same month. The US administration justified this as a measure against indirect imports of Russian oil. However, India’s oil purchases from Russia were encouraged by the US to prevent global oil price spikes. Other countries, including China, Türkiye, Brazil, and the EU, have also continued buying Russian oil despite sanctions.
India’s Export Dependence on the US
The US is India’s largest export destination, with its share rising from 12% in 2012-13 to 23% in early 2025. Post-pandemic, India’s export growth to the US was nearly four times higher than overall export growth. The tariffs threaten this growth and could worsen India’s trade and current account deficits. Several key industries depend heavily on the US market.
Sectoral Impact of Tariffs
The tariffs affect diverse sectors differently. Labour-intensive industries such as gems and jewellery, garments, carpets, leather, footwear, plastics, furniture, and marine products contribute about 30% of India’s exports. The tariffs risk livelihoods, especially in coastal states like Kerala, which rely on marine exports. Larger industries including non-electrical machinery, automobile parts, and iron and steel articles will also face pressure.
Variations in Sectoral Vulnerability
Some sectors may withstand the tariffs better. Gems and jewellery are price-inelastic and maintain strong demand in the US, especially among the Indian diaspora. India holds over 37% of US jewellery imports, far ahead of competitors like Israel. Conversely, the garments sector faces intense competition. China’s reduced share in the US market has benefited India and Vietnam, but India now faces challenges from Bangladesh, which has a lower tariff rate.
Government Role and Strategic Response
The extent of damage depends on government support. Financial aid and policy measures for micro, small, and medium enterprises are crucial. The government must also help businesses explore new markets to reduce overdependence on the US. Strategic export diversification will be vital to sustain growth amid tariff challenges.
Geopolitical and Trade Considerations
The US tariffs show complex geopolitical trade dynamics. While the US encourages Indian oil imports from Russia to stabilise global prices, it simultaneously penalises India’s exports. This inconsistency raises questions about fairness and strategic intent. Meanwhile, India balances relations with multiple global powers while protecting its economic interests.
Questions for UPSC:
- Point out the economic and geopolitical factors that influence tariff impositions in international trade with suitable examples.
- Critically analyse the impact of export dependence on a single country for India’s economic security and suggest diversification strategies.
- What are the challenges faced by micro, small, and medium enterprises (MSMEs) in global trade? How can government policies enhance their resilience?
- Estimate the role of international sanctions on global oil trade and analyse their effects on emerging economies like India.
