Trump Executive Order Lifts 25% Tariffs on India Following Key Commitments
In a significant diplomatic and economic move, the United States has officially revoked the additional 25% tariffs imposed on India last August. This decision, enacted through an executive order by President Donald Trump, comes after India agreed to a series of strategic commitments aimed at aligning with US national security and economic interests.
India's Pledges: Halting Russian Oil and Boosting US Ties
The executive order, issued separately from the broader India-US joint statement, outlines three critical commitments from India. First, India has committed to "stop directly or indirectly importing" oil from the Russian Federation. Second, it has represented that it will increase purchases of United States energy products. Third, India has recently agreed to a framework to expand defense cooperation with the US over the next ten years.
Notably, the joint statement released by both nations makes no mention of Russian oil, highlighting the distinct nature of this executive action. The order explicitly states that US officials "shall monitor whether India resumes directly or indirectly importing Russian Federation oil." Should India be found to have resumed such imports, officials are directed to recommend whether and to what extent President Trump should take additional action, which could involve the reimposition of the 25% tariffs.
Shifting Energy Dynamics and Trade Data
This development occurs against a backdrop of changing energy import patterns for India. Trade data reveals a notable shift: the US share in India's oil imports surged to 7.48% between April and October of this year, up from 4.43% during the same period last year. Conversely, Russia's share declined from 37.88% to 32.18% in the comparable timeframe.
Indian public sector refiners have already been increasing their engagement with US energy markets. Last year, they signed a one-year deal for American liquefied petroleum gas (LPG) imports. While crude oil imports from the US are nearing 10% of India's total, LPG imports of approximately 2.2 million tonnes per annum also approach 10% of annual imports, underscoring a growing energy partnership.
President Trump justified the tariff rollback, stating in the order, "I have determined that India has taken significant steps to address the national emergency... and to align sufficiently with the United States on national security, foreign policy, and economic matters."
Contrasting Approach: Threats of Tariffs for Iran Trade
While easing tariffs on India, the Trump administration has simultaneously issued warnings to other nations. The same executive order threatens countries with additional 25% tariffs for trading with Iran. It states that beginning on the effective date, such duties may be imposed on goods imported into the US from any country that directly or indirectly purchases, imports, or otherwise acquires goods or services from Iran.
President Trump emphasized this stance, saying, "I determine that it is necessary and appropriate to impose an additional ad valorem duty on imports of articles that are products of foreign countries that directly or indirectly purchase, import, or otherwise acquire any goods or services from Iran."
India's trade with Iran has been on a downward trend in recent years. Data from 2024-25 shows India's top exports to Iran included cereals worth $757.52 million, tea, coffee, and spices worth $70 million, animal fodder worth $71 million, and fruits and nuts worth $55 million. In 2024, Iran's total imports were approximately $68 billion, with leading partners being the UAE ($21 billion), China ($17 billion), Turkiye ($11 billion), and the EU ($6 billion). India's share was a modest $1.2 billion.
Historical Context and India's Stance on Sanctions
India had previously criticized US targeting over Russian oil purchases, calling it "unjustified and unreasonable" and vowing to take "all necessary measures" to protect its national interests and economic security. This sentiment is echoed in broader analyses of US sanctions policy.
A working paper by former Reserve Bank of India governor Urjit R. Patel, titled 'Asphyxiation by Sanctions: Harm, Fear and Smog,' labels the US as the "hegemonic sanctioner." The paper argues that India should view emerging international financial architectures, such as those around BRICS and the Asian Infrastructure Investment Bank (AIIB), as "risk mitigants" and rational responses to the expanding sanctions regime.
Patel's research highlights that out of 1,325 global sanctions since 1949, 486 have been imposed by the US, which currently administers over thirty sanctions programs—making it responsible for three times as many sanctions as any other country or international body. The paper notes that US-led sanctions have surged in recent decades, partly due to the collapse of the Soviet Union.
The former RBI Governor points out that the US has "pioneered secondary sanctions on an industrial scale," often in coordination with allies like the G7 and the EU, forming what he describes as a "posse." These extraterritorial sanctions aim to impede economic activity by third countries that would not otherwise violate primary sanctions.
Patel further explains that the effectiveness of US secondary sanctions relies heavily on the centrality of the US financial system and the US dollar's role as the global principal currency for cross-border transactions. However, he warns that overuse of the US dollar correspondent banking network as a "switch" on payments has prompted many countries to explore alternatives, potentially undermining the dollar's dominance in the long term.
This executive order marks a pivotal moment in India-US relations, balancing economic relief with strategic commitments, while reflecting the complex interplay of global trade, energy security, and geopolitical alignments in an era of increasing sanctions and shifting alliances.
