U.S.-India trade relations plunged into crisis on Wednesday after President Donald Trump issued an executive order imposing an additional 25% tariff on Indian goods, citing India's continued reliance on Russian oil.

The decision follows the collapse of trade negotiations and marks the most significant downturn in bilateral ties since Trump resumed office in January.

The order, which raises tariffs on some Indian products to as much as 50%, will take effect 21 days after 7 August. Key Indian export sectors such as textiles, footwear, and gems and jewellery are expected to be hit hardest.

In a sharp rebuke, India’s Ministry of External Affairs called the move “extremely unfortunate” and said, “India will take all actions necessary to protect its national interests.” It added that the country’s oil imports are based on energy security considerations and market dynamics, not politics.

The timing of the U.S. decision coincides with Indian Prime Minister Narendra Modi’s planned visit to China, his first in more than seven years, prompting speculation about shifting strategic alignments.

Madhavi Arora, an economist at Emkay Global, warned that the new levies would “practically kill trade between the two nations”. Another economist, Garima Kapoor from Elara Securities, noted that the tariff shock could pressure the Indian rupee and spur new calls for fiscal relief.

India imported a record $52 billion of Russian oil in 2024, according to government data. The White House did not comment on whether China, another major Russian oil buyer, might face similar penalties. However, U.S. Treasury Secretary Scott Bessent recently told Chinese officials that failing to curb such purchases could trigger new tariffs under pending legislation.

A senior Indian government official said the steep tariff rate and sudden nature of the move caught New Delhi off guard, even as it remained engaged in trade discussions with Washington. There are now behind-the-scenes efforts to negotiate a compromise that could involve a gradual cut in Russian oil imports in exchange for tariff relief.

The trade fallout adds further strain ahead of the 12 August expiry of the U.S.-China tariff truce, after which both sides are expected to reintroduce triple-digit duties on a wide range of goods.

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