Trump Imposes 50% Tariffs on Indian Exports Over Oil Ties with Russia

India Faces Dual Challenges: Rising Tariffs and Declining Fuel Demand

India is currently grappling with two significant challenges that are putting pressure on its economy. On one front, there is a noticeable decline in fuel demand, while on the other, the United States has significantly increased tariffs on Indian exports, adding to the country's economic strain.

The U.S. decision to raise tariffs on Indian goods to 50% was directly linked to India’s ongoing oil trade with Russia, which the White House views as undermining U.S. efforts to restrict Moscow’s war funding. This move by the Trump administration highlights the growing tensions between the U.S. and India over their respective relationships with Russia.

The new tariff rate is among the highest imposed by Trump on any trading partner since his return to the presidency. Although only about 20% of India’s total exports go to the U.S., specific sectors such as apparel, textiles, chemicals, gems, and jewelry are particularly affected. According to UBS, approximately $8 billion worth of goods are now at risk of disruption, which represents roughly 2% of India’s GDP. Meanwhile, Trump has also labeled Russia as an “extraordinary threat” to the United States.

Fuel Consumption Trends in July

New data from India’s oil ministry revealed a drop in overall fuel consumption to 19.43 million metric tons in July. This marks a 4.3% decrease from June, when the figure stood at 20.22 million metric tons, and it is also lower than the 20.24 million metric tons recorded a year earlier.

Diesel, the most commonly used fuel in India, saw the steepest decline, with sales dropping by 9% to 7.36 million tons. Gasoline (petrol) remained slightly lower than June but still showed a 5.8% increase compared to the same period last year.

There were some positive trends as well. Liquefied petroleum gas (LPG), primarily used for cooking, increased by 10.3% to 2.78 million metric tons in July compared to June. It also showed a year-over-year rise of 4.9%. However, naphtha, used in petrochemical manufacturing, fell by 2% from June and was 18% lower than the same time last year. Bitumen, used for road construction, experienced the sharpest drop, with a 32% decline from June levels.

Continued Russian Oil Imports Despite U.S. Pressure

Despite the pressure from the U.S., India continues to import Russian crude oil. According to Kpler, Moscow shipped around 3.35 million barrels per day of crude in recent weeks, with India purchasing approximately 1.7 million of that. China took another 1.1 million barrels. Russian oil is not under full sanctions like gas, but it is subject to a $60 price cap set by G7 nations after the 2022 invasion of Ukraine. The aim is to allow the oil to flow while limiting Moscow’s revenue. This hasn’t stopped India from continuing its purchases.

Trump is trying to pressure BRICS countries, including India, to distance themselves from Russia. He has even warned of a potential 10% tariff on imports from these nations, accusing them of “aligning themselves with Anti-American policies.” Additionally, India’s trade ties with China have started to improve, causing further concern in Washington. Prime Minister Narendra Modi is planning to attend the Shanghai Cooperation Organisation summit in Beijing on August 31, marking his first visit to China in over seven years.

International Energy Dynamics

Amid these developments, oil prices initially rose slightly but then fell again after U.S. Secretary of State Marco Rubio stated, “We’ll have more to say about that later on today,” when asked about new sanctions on Russia. The U.S. Energy Information Administration confirmed that American firms pulled 3 million barrels of crude from inventories during the week ending August 1. This number exceeded analysts’ forecasts of 0.6 million barrels, although it was slightly less than the 4.2 million-barrel draw reported by the American Petroleum Institute.

Europe has not completely cut off Russian energy supplies either. In 2021, Russia was the EU’s largest supplier of petroleum, accounting for 29% of its oil imports. That share has dropped to just 2% this year after the EU banned seaborne Russian crude. However, Eurostat data from the first quarter of 2025 showed that 19% of Europe’s LNG imports still come from Russia. UBS analyst Giovanni Staunovo explained that only certain LNG terminals, such as Arctic LNG 2, are under sanctions; not all Russian gas exports are blocked. This complicates Washington’s argument that India should fully stop buying from Russia when Europe still hasn’t done so.