(MENAFN- The Arabian Post)

By T N Ashok

NEW YORK: Trump's 50% tariffs on Indian exports took effect from Wednesday as there has been no resolution to the dispute over Russian oil buys in by India. In a move that has stunned global markets and rattled one of America's most strategically important partnerships, President Donald Trump on Wednesday imposed punishing 50% tariffs on Indian exports, doubling a levy he first set at 25% earlier last month.

The sharp escalation comes as Trump seeks to weaponize trade in his broader global economic war and punish India for continuing to buy discounted Russian crude - a practice New Delhi has repeatedly defended as both legal and essential to its energy security. The decision could trigger the proposed Indi-US trade to rise by 2030 to worth $530 billion annually, rewriting the script on Indo-U.S. ties that had, until recently, appeared to be warming under Trump's second term.

Trump's order applies across a broad swath of Indian exports to the U.S., including textiles, pharmaceuticals, auto components, IT services, and agricultural products, many of which depend on the U.S. as their primary market.

“This is economic leverage,” Vice President JD Vance said on NBC's Meet the Press last Sunday, defending the move.“India cannot bankroll Russia's war machine through oil purchases and expect American markets to remain open. We're going to make it harder for the Russians to get rich from their oil economy.”

Trump himself was more blunt.“Modi made a bad deal for India. They're buying dirty Russian oil. America doesn't like it. And if they want access to our market, they've got to play by our rules,” he told reporters at the White House.

India, the world's third-largest oil consumer, has become one of Moscow's biggest buyers of crude since the Ukraine war erupted in 2022. Oil Minister Hardeep Singh Puri has consistently argued that India will buy from“wherever it's cheapest” to shield its economy from global price shocks.

Prime Minister Narendra Modi, addressing a rally in Ahmedabad earlier this week, avoided mentioning the U.S. directly but struck a defiant note:“India will not bow to external pressures. Our duty is to protect the sovereignty of the nation and the livelihood of our farmers, workers, and small businesses. We will buy what we must to keep our economy strong.”

That line echoed Modi's nationalist stance - framing economic self-interest as sovereignty defense. It plays well domestically, particularly as India prepares for another election cycle where the ruling BJP cannot afford to appear subservient to Washington.

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Trump's 50% tariff could affect as much as 35 billion annually of India's present level of $ 87 billion. Indian export revenues, according to trade analysts in New Delhi. Industries most exposed include: Textiles & Apparel: India's largest export segment to the U.S. faces obliteration in price-sensitive markets. Pharmaceuticals: Indian generics, which account for 40% of U.S. prescriptions, may become uncompetitive. Ironically, this could hurt American consumers by raising drug prices. Auto Components & Engineering Goods: Already squeezed by global supply chain shifts, they will lose cost advantage. IT Services & Outsourcing: Tariffs on service exports may push American companies to reconsider their heavy reliance on Indian firms like Infosys and TCS.

India has not formally announced retaliatory measures but senior Commerce Ministry officials confirmed that“all options are on the table”, including blocking American agricultural imports - wheat, corn, soybeans, and dairy.

Such a step could devastate U.S. farmers, many of whom form Trump's political base in swing states.“If India slams the door, we're in trouble,” said a soybean exporter from Iowa. Wisconsin too gets affected. Indian officials are also quietly weighing curbs on U.S. tech giants operating in India - Amazon, Google, Meta - and restrictions on defense purchases.

One of the most overlooked consequences could be in healthcare. Indian pharmaceutical companies supply nearly 70% of the bulk drugs used in American generics.“If tariffs remain in place, American consumers will see higher drug prices within months,” warned a senior executive at Dr. Reddy's Laboratories.“This will hurt the U.S. more than India because patients will pay the price.” Hospitals and insurers in the U.S. are already lobbying Congress to push back against Trump's tariff regime, fearing political backlash from voters facing rising medical costs.

The timing of Trump's trade war with India is complicated by old controversies. Opposition leaders in New Delhi have revived the Rafale fighter jet scandal, pointing to how Modi's government allegedly steered a lucrative defense offset deal toward Anil Ambani's now-embattled Reliance Defence.

Congress leaders argue that India is being squeezed twice - first through questionable defense deals that favoured cronies, and now by an American president using trade as a weapon. The BJP dismisses these charges as political theatre, but the overlap of corporate scandals and geopolitical pressures adds fuel to the fire.

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For Washington, the tariff escalation is not just about oil. It is also about sending a message to allies: the U.S. will punish anyone who undercuts sanctions on Russia. But the move risks alienating a partner the U.S. has long considered indispensable in countering China in the Indo-Pacific. India is a member of the Quad alliance with the U.S., Japan, and Australia, and hosts American military exercises.

“This is short-term punishment that could have long-term strategic costs,” said Ashley Tellis, a senior fellow at the Carnegie Endowment.“India will now hedge harder with Russia and China, undermining the very purpose of U.S. Indo-Pacific strategy.”

For Modi, the crisis presents both political danger and opportunity. His nationalist message of standing up to foreign pressure resonates at home. Yet, the Indian economy - already slowing due to high interest rates and weak global demand - cannot easily absorb the tariff shock.“India is being forced into a corner,” said Arvind Panagariya, former chief economic adviser.“If exports to the U.S. collapse, growth will suffer, jobs will be lost, and the political cost for Modi could be severe.”

Diplomatic talks are still ongoing, with trade negotiators from both sides meeting in Washington next week. But insiders say the mood is grim.“Trump has made up his mind. He wants India to stop buying Russian oil completely,” said one U.S. official.“Until that happens, the tariffs stay.”

For India, the dilemma is existential: give up cheap Russian oil and risk energy inflation at home, or lose access to its most critical export market. As Modi thundered in Gujarat, the message was clear: India will not bend. Trump, never one to blink, seems equally determined. Caught in between are millions of workers, farmers, and consumers in both nations, facing the fallout of a geopolitical fight dressed up as an economic one.

For two decades, the U.S. and India have touted their partnership as a natural alliance - the world's oldest democracy and its largest democracy, bound by shared values and strategic interests. Now, with Trump's tariffs in place, that bond faces its severest test yet.

The coming months will determine whether Washington and New Delhi can salvage the relationship - or whether Trump's trade war will drive India further into Russia's and China's orbit, reshaping the global order in ways no one intended. (IPA Service )

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