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Under current circumstances, can the US and India move beyond tariffs to revive the strategic logic of their rapprochement?
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In geopolitics, the language of friendship often masks the mechanics of leverage.
Earlier this month, the United States (US), citing India’s continued crude oil imports from Russia, announced a steep 50 percent tariff on Indian goods—effective 27 August 2025. The White House, typically careful in its diplomatic signalling, described the move as “a necessary step to exert secondary pressure on Russia”. It is not lost on observers that this pressure is being applied not to Moscow or even Beijing—but to New Delhi.
India, long touted by Washington as a “strategic partner” and a bulwark against Chinese expansionism, now finds itself in the crosshairs of a punitive economic action. The moment is telling—not just about trade policy, but about the deeper fault lines in global power realignments.
India, long touted by Washington as a “strategic partner” and a bulwark against Chinese expansionism, now finds itself in the crosshairs of a punitive economic action.
India is not alone in buying Russian oil—China imports more by volume. But unlike China, India is still seen as a vulnerable actor. In the words of Roman Babushkin, the Russian Deputy Chief of Mission in New Delhi, the US pressure is “unjustified and unilateral”. Yet it is also entirely consistent with a long-standing American tradition: using economic tools as an extension of foreign policy.
This latest tariff episode echoes the Smoot-Hawley Tariff Act of 1930, which raised US duties on over 20,000 imported goods. The intent then was protectionism; the result was global retaliation and a deepened Great Depression. Today, the justification is geopolitical. The risk, however, remains the same: unintended consequences and fractured bilateral alliances.
Economically, tariffs are among the least efficient of policy instruments. As a former economist at the World Bank once observed, “Tariffs are a tax on your own consumers, imposed in someone else’s name”.
By definition, a tariff is a tax on imports. The 50 percent levy will not be paid by Indian exporters alone—it will also hit American importers, distributors, and ultimately, consumers. Inflationary pressures are likely to rise. Sectors such as Indian textiles, pharmaceuticals, IT services, and auto components—core contributors to India's US$88 billion in exports to the US—will feel the sting first.
By definition, a tariff is a tax on imports. The 50 percent levy will not be paid by Indian exporters alone—it will also hit American importers, distributors, and ultimately, consumers. Inflationary pressures are likely to rise.
To interpret the tariff merely as a Ukraine-related sanction is to miss the larger strategic picture.
India’s “Atmanirbhar Bharat” policy, which promotes economic self-reliance, has already unnerved many in Washington. The growing assertiveness of Indian regulators—especially toward Big Tech and e-commerce giants—has been read in some quarters as an inward turn. US pharma, digital services, and retail conglomerates face increasing compliance barriers in India.
Then there’s politics. Protectionist measures are popular across party lines. Tariffs become a domestic messaging tool—symbolising strength abroad and responsiveness at home in the US.
Meanwhile, India’s refusal to explicitly align with the West on Ukraine, its abstentions at the UN, and its continued engagement with Russian energy markets are viewed by Washington with frustration. New Delhi’s strategic autonomy, once admired, is now an irritant.
There are not many clear winners in this game. Some US manufacturers may gain momentary relief from Indian competition. However, for most consumers, the cost of Indian imports—from generic medicines to apparel to software—will rise. For India’s exporters, especially in textiles and IT, the damage will be acute. And for the broader relationship, the loss will be trust.
India’s former top diplomat, Foreign Minister S. Jaishankar, has quietly pushed back. Moscow, for its part, is offering steeper discounts to Indian oil buyers. Even Nikki Haley, a Republican, has warned that treating India “like China” is a strategic error.
Indeed, the most troubling aspect of this tariff move is not its economic impact, but its symbolic message: that partnership with the US remains conditional.
India has not taken the bait—at least not yet. It is worth noting that Russia currently supplies 40 percentof India’s crude oil—an estimated 250 million tonnes annually. Energy security is not a discretionary relationship. And the stakes are high: India’s overall Merchandise Trade Deficit in FY 2024-25 was an estimated US$94.26 billion. Affordable oil is a macroeconomic necessity.
India also knows that a full economic pivot to Moscow is unrealistic. The US remains its largest trade partner and a key source of technology, investment, and defence equipment.
But India also knows that a full economic pivot to Moscow is unrealistic. The US remains its largest trade partner and a key source of technology, investment, and defence equipment. Talks are reportedly ongoing over a US$1 billion deal for GE jet engines for India’s indigenous fighter aircraft programme—underscoring the complexity of this relationship.
The question that remains is how should India respond? Not by mirroring tariffs or indulging in tit-for-tat diplomacy. Rather, India could play the long game:
History offers a blueprint. In the early 1990s, after being denied aid and pressured on nuclear policy, India opened its economy, built new alliances, and emerged more resilient. Sometimes, adversity can be the architect of transformation.
The real question is not whether tariffs will bite. They most certainly will. The question is whether the US and India can rise above transactional politics and return to the strategic logic that underpinned their rapprochement: that in a more fragmented world, democracies must find common ground.
As the political scientist Joseph Nye once noted, “Power is the ability not just to coerce, but to attract”. Both nations must recognise the stakes.
Qaiser Shamim is a distinguished expert in fiscal policy, trade relations and corporate governance.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
With over four decades at the forefront of public service and international corporate strategic advisory, Mr. Shamim is a distinguished expert in fiscal policy, trade ...
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