India has already engaged in five separate rounds of trade negotiations with the United States, yet a comprehensive agreement remains elusive. The key points of contention that have prevented progress include India’s reluctance to open its agricultural and dairy sectors to foreign competition, as well as its continued import of crude oil from Russia. These unresolved issues have now become major stumbling blocks, particularly as President Donald Trump intensifies trade pressure on India. According to a report by Reuters, the US administration is now threatening to raise tariffs on Indian imports up to 50% unless both nations can arrive at a mutually acceptable trade deal shortly.
This looming tariff hike could have a significant impact on Indian exports, particularly in sectors like textiles, gems and jewellery, and chemicals—industries that are heavily dependent on the American market. With this threat hanging in the air, New Delhi is weighing its options carefully, attempting to protect domestic interests while keeping the door open for further dialogue with Washington.
Despite the impasse, Indian negotiators remain cautiously optimistic. Behind-the-scenes discussions are ongoing, and a delegation from the US trade office is expected to visit New Delhi later this month for another round of talks. Indian officials have hinted at possible concessions in selected areas, such as reducing tariffs on specific US agricultural exports like almonds and cheese. However, Prime Minister Narendra Modi has made it clear that the government will not compromise on fundamental issues. In a recent speech, he reiterated his firm stance on defending the livelihoods of Indian farmers, dairy producers, and fishermen, even if it means facing economic consequences.
Another potential path for India involves reassessing its current energy imports from Russia. At present, India imports over one-third of its crude oil from Russia—a figure that has sharply increased since the outbreak of the war in Ukraine. However, due to increasing global pressure and a reduction in the cost advantage of Russian oil, major Indian refiners such as Indian Oil Corporation (IOC) and Hindustan Petroleum Corporation Limited (HPCL) have started cutting back on their Russian oil purchases. Although India has stated that it could shift its sourcing to countries like Saudi Arabia, Iraq, or the UAE, abandoning Russian oil entirely could result in higher domestic fuel prices—posing a major challenge for the government, which must balance economic pressures with international expectations.
On the diplomatic front, India appears to be seeking stronger alliances with other nations that are also facing similar trade pressures. Brazil, another member of the BRICS group, is reportedly planning to collaborate with India, China, and Russia to formulate a unified strategy in response to the US’s tariff actions. Indian leaders are also working to rebuild relationships with China and Russia. High-level visits between the nations’ defence and foreign ministers have taken place recently, and Prime Minister Modi is scheduled to travel to China soon. President Vladimir Putin of Russia is likewise expected to visit India later this year. These diplomatic engagements indicate that India may be leaning more toward regional cooperation with its BRICS allies to counterbalance the growing pressure from the United States.
If trade talks between India and the US ultimately collapse, the consequences could be serious. The United States is one of India’s largest trading partners, and in the fiscal year ending March 2025, Indian exports to the US amounted to approximately $87 billion. These exports include pharmaceuticals, garments, diamonds, and petrochemical products, which collectively contribute close to 2% of India’s gross domestic product. Should the US impose a 50% tariff across the board, many of these exports could become unviable in the American market. Pharmaceutical products might be the only major category to survive such a blow due to their separate tax treatment.
The damage, however, would likely extend beyond physical goods. India’s thriving services sector, particularly its software and IT industry, may also suffer if US-India tensions rise further. Indian tech firms benefit substantially from the US visa regime, especially programs that facilitate temporary work visas for Indian professionals. If the US government chooses to restrict these visa programs as part of a broader trade retaliation strategy, it could lead to job losses and a decline in outsourcing contracts—two pillars of India’s booming tech ecosystem.
In conclusion, India finds itself in a delicate position, requiring strategic decision-making that balances international diplomacy, economic stability, and domestic political commitments. The next steps taken by New Delhi could determine not just the future of its trade with the United States, but also its broader role in a rapidly evolving global order.
