Vishal Sharma
Just when NISAR, a satellite jointly developed by the US and India, was lifting off from Sriharikota, Karnataka for the outer space, came the news of the US President, Donald J Trump imposing 25 % tariff on Indian goods plus an unspecified penalty for buying Russian oil. The irony of it could not have been more bitter. The moment the news of tariff on Indian exports left the US shores, the launch of the US satellite from an Indian launch pad- a momentous moment in itself- disappeared from the Indian news portals and news channels completely; as if there was no satellite launch that day.
The US’s strategic alignment with India on space technology has not stopped it from acting perniciously on trade with India. It has chosen to tariff India on a scale higher than it has tariffed any other equivalent or near equivalent economy so far. Given the rhetoric preceding the US tariff decision, it was widely believed that tariff on Indian exports would likely be within 15-20 % band. But 25 % tariff has come as a rude shock and, importantly, the threat of penalty, which could be another 30- 35 % or even 100% tariff, for buying Russian oil, is seen as a double whammy.
Why has Trump done what he has done?
It is difficult to figure out the reason underlying the tariff shock given that negotiations between trade representatives of the two countries are still ongoing and have not broken off. In fact, a delegation from the US is expected to come to India in the second half of August to finalise the trade deal. Ever since hostilities between India and Pakistan paused and Trump claimed credit for having brokered the same, India has denied him his day under the sun. Pakistan though was quick to understand the nature of the man and allowed him to appropriate credit for cessation of hostilities. In any case, it served Pak’s cause of announcing to the world that the issue was not bilaterally settled; and a third party- anathema to India- had to step in to enable peace between the warring parties.
India’s response post Op Sindoor has apparently riled Trump so much that he sees in it an attempt to deprive him of the coveted Nobel peace prize. Trump is so enamoured of the Nobel peace prize that every time he has intervened in military conflicts across different geographies and got the warring countries to suspend fighting, he has made a case that since he has been dousing fires all across, he deserves the Nobel peace prize. The man is narcissistic and so full of himself that he can’t see beyond his nose. India will have to find a way to curry favour with the man, who wants to be appeased and flattered, without looking smarmy.
Trade and Cultural issues impinging on the trade deal
The other reason is trade linked. Indian negotiators have been refusing to budge on the issue of opening of agri and dairy sectors to the US exports against Trump’s wishes who in fact wants the entire Indian economy opened to the US exports. Indian arguments are both cultural and economic and make sense. American cows are fed meat based diet; it is almost unthinkable that Indians will accept milk from a cow whose feed is not vegetarian. Milk and milk products in India have religious symbolism too and, therefore, it is feared that people may resent or rather agitate against the US dairy imports. As regards, agri imports from the US, there is an apprehension that Indian farmers who have marginal land holdings and are mostly engaged in subsistence farming may not be able to compete with the US farmers, who have large holdings and are considerably prosperous relative to their Indian counterparts. Indian agri sector, and also dairy sector, may not survive the import onslaught from the US, and this could lead to huge job and income losses in these sectors. While the Indian concerns are not misplaced, however, an inflexible approach may be self defeating given that on the other side of the table sits a man who is a bully and will have his way come what may.
New Delhi may, therefore be well served, if it were to look at marking all dairy imports or such imports in which there is an apprehension that the American milch cattle may be on non veg feed as non veg with a red dot symbol. This way, dairy product choices can be left to consumers themselves; if they wish to consume it, they may very well do that. And if they don’t, they are free to reject them. In the interest of fairness, they should not be subjected to obfuscation or suppression of info with regard to any such imported product. A full and fair disclosure on the dairy imports will set at rest any apprehension that any one may have in this regard. Similarly, protecting the entire agri sector from the off shore competition in this age of globalization may not be sensible although there is an overwhelming body of opinion in the country in favour of protectionism in this sector. Everybody understands why such an argument prevails after all no one has forgotten what happened to the farm laws in not so distant past in this country. Farm laws were brought in to deal specifically with this kind of problem; they, therefore, deserved a fair chance. Be that as it may, it will be worthwhile to move from sweeping protection of the entire agri sector to partial protection in which items where it is near impossible to withstand the trade onslaught from the US can be kept out of the FTA’s purview pro tempore to be considered later. But where some competition can be allowed without any serious structural damage to the sector and farmers, there is no harm in letting in exports from the US. Soyabean can be one such product. In 2023, India imported Soybeans primarily from: Togo ($213M), Nigeria ($126M), Niger ($108M), Mozambique ($38.5M), and Tanzania ($33.4M). India can conveniently import Soyabean from the US instead of from the countries from which it is presently importing. India’s agricultural imports have increased, from $15.5 billion in 2013-14 to $38.5 billion in 2024-25. The main import items include vegetable oils and pulses, driven by low domestic production and yield issues. India is also importing vegetable oils, spices, cashew, alcohol beverages, oil seeds, oil meals etc. Given the raging Trumpian firestorm, there is no harm in shifting all agri imports to the US.
How to deal with penalty due to Russian oil purchases ?
Trump is greatly discomfited by what he sees as Russian President, Vladimir Putin’s recalcitrant attitude on the issue of ceasefire with Ukraine. Trump had hoped that President Putin would take up the offer of ceasefire on conditions which he felt favoured Russia more, but that has not happened. There has been plethora of commentaries in the international media that Putin has played Trump. This has got Trump’s dander up as he feels Putin has not treated him well. Since he can’t seem to get Putin to come to the negotiating table, he has begun targeting those who have been buying oil from Russia to constrict Russia’s source of revenues and hence force him to cease war fighting. Hence India has been chosen for secondary sanctions. India-Russia trade has soared to $68.7 billion in FY25, a six-fold jump since the Ukraine war, driven by a spike in crude oil imports and strong defence collaboration. As India defends its energy choices amid US pressure, Russia remains its top oil and arms supplier. However, the price gap that once made Russian Urals crude an attractive proposition for the Indian refiners is rapidly shrinking. The discount on Urals oil for August 2025 delivery to India has reportedly narrowed to just $1.70-$2 per barrel below dated Brent-the tightest spread since Russia invaded Ukraine in 2022. That discount is down from $2-$2.50 in July, and well below the steep markdowns India enjoyed throughout 2023 and early 2024. There no doubt that India has benefited from import of cheap Russian oil. But that advantage may now be fading due to falling Russian supply due to domestic refinery runs and upcoming maintenance at the Sakhalin-1 project.
India has already expanded crude oil imports to nearly 40 countries. Choices before India, therefore, are not restricted, but India will have to exercise the choice which best suits the national strategic interests. It is no one’s argument that India should buckle under pressure and look for oil import tie ups with other countries even when they don’t make economic sense. But in the totality of circumstances, commonsensical approach should take precedence over strategic exceptionalism if the latter is likely to hurt the greater national interests. One of the ways in which Russian oil issue can be addressed is by seeing if President Putin will be willing to buy into the proposition of temporary truce with Ukraine without of course holding out any future commitments. India should take the lead and do backdoor diplomacy with Putin on the issue. President Putin should have no issue with this as it will give him respite from the war without having to offer any long term guarantees. This will most certainly satisfy Trump too, being the transactional man he is, and cause him to ease secondary sanctions on India.
India has handled the Trumpian storm well so far. It is better not to respond to him and match him statement by statement; but work quietly behind the scenes to get him to climb down from his toxic position. India is currently the fastest growing economy in the world. We can’t sacrifice our growth in a fight that may hit our growth potential in the near to mid- term. It’s that period in a test match where saving wickets, and not throwing kitchen sink at the bowlers, is important.We would be better advised to heed the wise counsel of the foxes as much as we choose to be guided by the hedgehogs.
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