Trade war fears mount as Trump pushes India to cut Russian oil imports

Escalating trade tensions, US President Donald Trump announced on Sunday that the US is considering raising tariffs on India unless New Delhi agrees to Washington's demands to reduce its purchases of Russian oil, following the latest round of inconclusive trade talks.

"(Prime Minister Narendra) Modi is a good guy. He knew I was not happy, and it was important to make me happy," Trump told reporters aboard Air Force One, according to a Reuters report.

In response to a query concerning India's procurement of Russian oil, Trump stated: 

Tariff threat over Russian oil purchases

The trade relationship between the US and India remains strained. 

Following months of tense negotiations, the US had previously escalated economic pressure by doubling import tariffs on Indian goods to 50% last year. 

This punitive measure was directly in response to India's continued and significant purchases of Russian oil, a move the US views with disapproval amid geopolitical tensions.

Fears that strained US-India trade relations could further postpone a trade deal led to a reaction in Indian markets on Monday, with the information technology stock index dropping approximately 2.5% to a one-month low.

According to Republican Senator Lindsey Graham, a close associate who was traveling with Trump, the reduction in Indian oil imports was aided by US sanctions targeting Russian oil companies and increased tariffs on India.

Graham supports a bill that would levy tariffs of up to 500% on countries, including India, that persist in purchasing Russian oil.

"If you are buying cheap Russian oil, (you) keep Putin's war machine going,” he was quoted as saying in the Reuters report. 

Existing tariffs and market reaction

Graham stated that India was now purchasing "substantially less Russian oil" primarily due to Trump's actions.

However, trade experts caution that New Delhi's measured strategy could potentially undermine its standing.

According to Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), Indian exports are already subject to a 50% tariff in the US, with 25% of that levy being related to the purchase of Russian crude oil.

Indian refiners have reduced imports in the wake of sanctions, but purchasing has not ceased completely, placing India in a "strategic grey zone."

Srivastava argued that "ambiguity no longer works," demanding that India take a clear position on Russian oil. 

He cautioned that even if India completely stops buying Russian oil, US pressure might continue, potentially shifting to other trade issues. He also warned that increasing tariffs could result in significant export losses.

Strategic grey zone

India adopted a cautious diplomatic position following the US' capture of Venezuelan President Nicolas Maduro on Saturday.

Separately, New Delhi called for dialogue without specifically mentioning Washington.

India's exports to the US saw a jump in November, despite high tariffs.

However, shipments overall dropped by over 20% between May and November 2025. 

In an effort to secure a trade agreement with Washington and address US concerns, the government in New Delhi has requested that refiners provide weekly reports detailing their purchases of Russian and American oil.

Despite at least three conversations between Modi and Trump since the tariffs were implemented, and a meeting between India's commerce secretary and US trade officials last month, the trade talks remain unresolved.