Trade between the US and India is going through one of its most challenging periods in recent years. Washington is hinting that it would raise secondary duties on Indian imports, and it is making this move directly related to what is happening in Russia.
- Why is Russian oil making trade between the US and India harder?
- What effect are the ongoing trade talks having?
- What might happen if tariffs go up?
- What makes the Alaska gathering so important?
- What effect could this have on trade between the US and India in the future?
- What could help lessen the tension?
- The end
The warning comes just days before a very important summit in Alaska between President Trump and Russian President Putin. The war in Ukraine is at the heart of this diplomatic drama, with the US pushing for a ceasefire and stronger penalties on Russia. Scott Bessent, the US Treasury Secretary, says that the conclusions of this discussion could have a big impact on US-India trade policy.
“We’ve slapped extra taxes on Indians who import oil from Russia. Bessent stated in an interview, “And I could see that if things don’t go well, sanctions or secondary tariffs could go up.” His comments show how tightly economic and foreign policy are linked in the world economy today.
Why is Russian oil making trade between the US and India harder?
India has been buying more and more cheap Russian crude oil since the start of the war in Ukraine. This change has been huge, going from only 3% of all imports in 2021 to between 35% and 40% in 2024. The Indian government has justified its choice, saying that it needs to make sure it can get cheap crude oil first because it is one of the biggest energy importers in the world.
Energy prices have a direct impact on the cost of living for millions of Indian families, especially those in rural and low-income areas. New Delhi says that getting cheaper oil is not only a strategic choice, but also a social and economic need.
The United States, on the other hand, sees things differently. Washington thinks that India’s ongoing purchases of Russian oil are hurting its efforts to cut off Moscow’s economic ties. Every big importer of Russian energy helps keep the Kremlin’s war machine going, according to US policymakers. This basic misunderstanding has become a major cause of conflict in trade between the US and India. Read another article on China Wary of US Election Impact
What effect are the ongoing trade talks having?
The disagreement over Russian oil imports comes at a bad moment for trade discussions between the two countries. New Delhi and Washington have been talking for a few months about how to remove trade obstacles and make it easier for both countries to access markets. On August 25, US trade officials are set to arrive in India to continue talks.
But things have been moving slowly. India’s high import taxes on dairy and agricultural goods are a big problem. Washington has consistently called for lower tariffs, saying that they make it harder for US farmers and exporters to reach India’s enormous consumer base.
President Trump has been very critical of India, calling it a “tariff abuser” and promising to cut the $45 billion trade deficit with Asia’s third-largest economy. This hard line has made the next discussions more important and made US-India trade relations less clear.
What might happen if tariffs go up?
The Trump administration has already put a 25% tax on Indian goods that are connected to buying Russian energy and weapons, on top of a separate 25% tax. The 50% combined rate will start on August 27.
Trade experts say that a tariff rate this high is a trade embargo, even though it doesn’t have that term. It would mean that India has the highest taxes of any US commercial partner in Asia. Industries that export items, such as textiles, jewelry, and leather goods, could be hit hard. Some economists think that these steps could cut India’s GDP growth by as much as half a percentage point.
Indian exporters will probably get fewer orders from US buyers because they are already facing competition from other countries, and demand is decreasing in some sectors. At the same time, American importers and shoppers could have to pay more for popular Indian commodities, like clothes and handmade items. This possible problem makes US-India trade relations even more tense.
What makes the Alaska gathering so important?
People are saying that the discussions between President Trump and President Putin in Anchorage are a last-ditch effort to find a way to halt the war in Ukraine. Washington wants to get Moscow to promise to do things that could lead to a truce. At the same time, it is putting pressure on its European partners to make their sanctions stronger.
Bessent stressed the importance of a united front by saying, “The Europeans need to join us in these sanctions.” The Europeans need to be ready to put these extra sanctions in place. If the talks don’t work out, US authorities are ready to make sanctions even stricter. For example, they might raise secondary tariffs on countries that keep buying Russian oil, of which India is a big part.
What effect could this have on trade between the US and India in the future?
If greater tariffs are put in place, the effects could last far longer than just short-term trade problems. Companies on both sides may change their plans for long-term investments because they are worried about continued volatility. This could slow down the expansion of trade between the two countries, which has been going up for much of the last ten years.
On the Indian side, authorities would have to find a way to balance their responsibilities to other countries with the demands of their economy. India treasures its strategic cooperation with the United States, but it also has a long history with Russia, especially in military and energy. To keep commercial relations between the US and India stable, it will be important to navigate this complicated web of interests.
Washington’s choice to raise tariffs comes with its own set of hazards. The goal was to get India to follow US foreign policy more closely, but it may also make India trade more with other countries, such as China, the EU, and Middle Eastern countries.
What could help lessen the tension?
Analysts say that both parties need to be more realistic if they want to avoid long-term damage. Some such methods are phased tariff cuts linked to certain policy changes and targeted exclusions for important goods. Working together more in areas like technology, renewable energy, and digital trade could also help ease tensions in more conventional areas like oil and agriculture.
In addition, both governments may benefit from talking about things in more general strategic terms. The US and India both want to make sure that the Indo-Pacific region is free and open, fight climate change, and make the region safer. Focusing on these common interests could help US-India trade relations become more stable.
The end
The next few weeks will be very important for commerce between the US and India. The meeting between Trump and Putin in Alaska could decide if Washington goes ahead with heavier tariffs or takes a more friendly approach.
In either event, the connection will always be shaped by the way trade and geopolitics affect each other. The stakes are quite high for everyone, including legislators, businesses, and individuals. Both countries stand to gain significantly from collaboration and to lose considerably by discord.
