Markets tumble as New Delhi vows to stick with Russian oil despite U.S. pressure
U.S. President Donald Trump has doubled down on trade pressure against India, imposing an additional 25% tariff on Indian-origin goods, raising overall duties to 50% — one of the steepest trade penalties ever leveled by Washington.
The decision puts at risk nearly $85 billion in annual Indian exports to the United States and threatens to upend New Delhi’s fragile growth outlook.
The tariffs, set to take effect Wednesday, follow Prime Minister Narendra Modi’s assertion that India will not compromise on its imports of Russian oil — a stance that Trump blasted as indirectly funding Moscow’s war in Ukraine. U.S. officials said Russian oil now makes up 42% of India’s total imports, up from less than 1% before the conflict.
The announcement sent shockwaves through Indian financial markets. The rupee slipped 0.2% to 87.75 against the dollar, while the benchmark Nifty 50 and BSE Sensex each lost 0.7% in early trading. Export-heavy sectors, including textiles, leather, processed foods, and marine products, led the losses.
Exporter associations warned that more than half of India’s shipments to the U.S. — worth around $87 billion — could be directly hit, giving Pakistan, Bangladesh, Vietnam and even China a sharp competitive edge. “We expect exports to drop 20 to 30% starting September, with American buyers already canceling orders,” said the president of the Engineering Exports Promotion Council.
India’s diamond and jewelry sector, already hurt by weak Chinese demand, faces an even bigger blow. The U.S. absorbs nearly one-third of India’s $28.5 billion in annual jewelry exports, making it the single largest market for the industry.
The Modi government has promised exporters financial relief, including cheaper loans and help diversifying into China, Latin America and the Middle East. Officials have identified 50 potential new markets, but industry leaders caution that replacing U.S. demand in the short term is unrealistic.
Analysts at Capital Economics estimate that if the full 50% tariff burden remains, India’s GDP growth could shrink by 0.8 percentage points in both 2025 and 2026 — among the steepest downgrades in Asia.
Despite mounting pressure, Foreign Minister S. Jaishankar defended New Delhi’s stance, arguing that Washington has not applied the same intensity of scrutiny to China or the European Union, both of whom also buy Russian oil.
With trade talks frozen and Modi preparing for a rare trip to Beijing, the tariffs underline widening rifts between the world’s largest and fifth-largest economies — a standoff that could redraw Asia’s trade map.
