India is staring at the prospect of escalating trade tensions with the United States as President Donald Trump threatened to sharply increase tariffs on Indian
goods within 24 hours, citing India’s continued purchase of Russian oil and "obnoxious" trade barriers. In an interview with CNBC, Trump accused India of “fueling the war machine” and warned of “substantial” tariff hikes, igniting shock and uncertainty within Indian diplomatic and economic circles. According to officials in New Delhi, the US President’s language, calling India’s economy “dead” and its citizens “indifferent to Ukrainians’ plight”, has rattled policymakers, complicating back-channel efforts to salvage a near-finalised trade pact.
Key Concerns & Government Response
- India currently buys 1.7 million barrels/day of Russian oil, second only to China.
- The Commerce Ministry is exploring relief packages for sectors most vulnerable to the tariffs, especially gems & jewellery, textiles, and engineering goods.
- A ₹22.5 billion export support scheme, announced in the February budget, may be fast-tracked or expanded.
- The government is also mulling limited access to US dairy imports (like cheese and condensed milk), which would be a rare concession for religious and policy reasons.
An internal Commerce Ministry estimate indicates that a 25% tariff hike could impact up to 10% of India’s exports in Q2 FY26. HSBC economist Pranjul Bhandari forecasts a 0.3 percentage point cut in GDP growth if the tariffs take effect, with further penalties likely curbing capital inflows and investments.
Opposition & Analysts Weigh In
Opposition leaders have slammed PM Narendra Modi’s “expensive friendship” with Trump, questioning his silence over repeated threats. “We’re being threatened with 25%+ tariffs, told not to buy oil from Russia. This friendship has turned out to be expensive,” said Congress leader Jairam Ramesh.Policy experts like Indrani Bagchi, CEO of Ananta Centre, believe India will avoid retaliation and instead push to continue trade deal talks, despite Trump’s personal barbs. “India will want to contain this without escalating. That’s not India’s style,” she said, suggesting Trump may be seeking a symbolic show of submission, which India is unlikely to offer.
While India is unlikely to retaliate, the risk of economic disruption is real. A wait-and-watch approach, coupled with export relief, dairy diplomacy, and sustained dialogue, appears to be New Delhi’s strategy as it navigates one of its toughest trade challenges in years.
