Recently, following the imposition of an additional 25 percent tariff by the United States—on top of the earlier 25 percent penalty imposed on India for acquiring Russian oil and defense equipment—Washington has claimed that India is indirectly assisting Russia in financing the war in Ukraine. India has robustly defended its stance, labeling the US action as unfair, unreasonable, and unjustified, emphasizing that its oil purchases from Russia serve its national interests. New Delhi has also highlighted that targeting India specifically is discriminatory, as China and multiple European nations continue to import Russian oil. Consequently, proposed trade negotiations and agreements with the United States have come to a halt.
This situation has placed Indian exporters to the US in a challenging position, leading to calls for special government financial aid and incentives to help them sustain export levels. The government is actively engaging with trade and export organizations to alleviate the immediate pressures and to diversify exports, leveraging recent free trade agreements with the UK and other nations. Although India has encountered similar challenges previously, the current circumstances are particularly complex, as it cannot afford to jeopardize its long-standing strategic partnership with the US. For India, the US relationship is of paramount importance, both strategically and economically.
Nonetheless, in the current altering landscape—where countries increasingly prioritize national interests over global cooperation, especially under US President Donald Trump’s “America First” policy—India must also reinforce connections with other partners. Many analysts believe that these tariffs are a temporary nuisance, and that a mutually beneficial trade agreement will eventually be reached by both parties. In this context, Prime Minister Narendra Modi’s recent attendance at the SCO Summit 2025 in China—his first visit in seven years—was notable. The meeting took place despite ongoing border tensions between India and China, such as the Galwan clashes, which resulted in casualties on both sides.
Modi’s discussions with Chinese President Xi Jinping represented a step towards reducing tensions, with both leaders expressing a preference for collaboration over competition. At the same summit, Modi also enhanced relations with Russian President Vladimir Putin. The SCO Summit, which was attended by over 25 heads of state, garnered global attention, particularly due to the trilateral presence of Modi, Putin, and Xi. Shortly thereafter, US President Trump remarked, “Looks like we’ve lost India and Russia to deepest, darkest China. May they have a long and prosperous future together.” In response, India reaffirmed that its relationship with the US is based on mutual respect, shared interests, and strong people-to-people connections. MEA spokesperson Randhir Jaiswal stressed that the India-U.S.
partnership has withstood numerous transitions and challenges, asserting that India’s ties with any nation should be evaluated on their own merits, rather than through the lens of a third party. However, US trade advisor Peter Navarro continued to criticize India, alleging it is an “oil money laundromat for the Kremlin” and engaging in “strategic freeloading.” These statements have been firmly dismissed by India as inaccurate and misleading. Despite these tensions, India has reacted with restraint, acknowledging the necessity of preserving robust relations with Washington. Over the last two decades, India and the US have established a significant strategic partnership across defense, security, trade, and technology.
Modi himself, in response to Trump’s “always be friends” remark, confirmed that India fully reciprocates those sentiments and is dedicated to a constructive and forward-looking partnership. However, Trump has consistently voiced dissatisfaction with India’s oil imports from Russia, labeling the trade relations as “a one-sided disaster.” He contended that US businesses encounter high Indian tariffs while India enjoys considerable access to US markets. Although he recognized recent Indian proposals to reduce tariffs, he deemed them “too late.” Meanwhile, India has fortified its ties with Russia, with President Putin and Prime Minister Modi reaffirming their close relationship. Economically, India is better equipped to navigate these challenges. Recent Q1 2026 GDP growth figures and an upgrade by S&P indicate resilience.
The government has also implemented reforms such as GST 2.0, which reduces the previous four tax slabs to two (5 percent and 18 percent). This is anticipated to enhance domestic demand, capacity expansion, and private sector investment, benefiting both farmers and MSMEs. While GST 2.0 is not a direct reaction to US tariffs, it will nonetheless bolster domestic manufacturing and consumption. However, resuming trade discussions with the US remains imperative. Both parties must strive towards a long-awaited trade agreement that facilitates a mutually agreeable resolution. Positive developments are hoped to emerge soon.