Tariffs, Trump And Russian Oil: A New Stress Test For India-US Trade Ties

New Delhi: The public rebuttal by India’s Ministry of External Affairs (MEA) on Friday of remarks made by US Commerce Secretary Howard Lutnick marks a rare moment of visible friction in what is otherwise portrayed as a deepening India-US strategic partnership.

By firmly stating that Prime Minister Narendra Modi and US President Donald Trump spoke “as many as eight times in 2025”, and by pushing back against the idea that a trade deal is stalled because Modi did not call Trump, New Delhi signalled that the problem lies not in diplomacy, but in Washington’s shifting political and economic calculations.

“India and the United States are committed to negotiating a bilateral trade agreement with the US as far back as February 13 last year,” External Affairs Ministry spokesperson Randhir Jaiswal said while addressing a regular media briefing here.

“Since then, the two sides have held multiple rounds of negotiations to arrive at a balanced and mutually beneficial trade agreement. On several occasions, we have been close to a deal. The characterisation of these discussions in the reported remarks (by Lutnick) is not accurate. We remain interested in a mutually beneficial trade deal between two complementary economies and look forward to concluding it. Incidentally, Prime Minister and President Trump have also spoken on phone eight occasions during 2025 covering different aspects of our wide-ranging partnership,” he said.

Jaiswal’s remarks come after Lutnick stated in a podcast hosted by entrepreneur Chamath Palihapitiya that the long-pending trade deal between India and the US failed to materialise not because of policy differences, but due to Prime Minister Modi’s refusal to speak directly with Trump.

Lutnick said that the whole trade deal was set up, but for it to reach its conclusion, Modi needed to call Trump. He said India was given a clear and time-bound window – “three Fridays” - to finalise the negotiations. However, he claimed that the Indian government was not comfortable with this, and Modi did not eventually make the call.

“The whole deal was set up,” Lutnick said. “But let’s be clear, it’s his (Trump’s) deal. He is the closer. He does the deal. You just had to have Modi call the President. They were uncomfortable doing it. Modi didn't call. We did trade deals with Indonesia, the Philippines, and Vietnam. We assumed a trade deal with India before them.”

At stake is far more than just a delayed trade agreement. The controversy touches on the future of India–US economic ties, Washington’s weaponisation of trade through tariffs, and the widening gap between strategic alignment and commercial confrontation.

Lutnick’s assertion that India–US trade negotiations are not progressing because Modi failed to personally engage Trump is unusual both in tone and content. India traditionally avoids publicising leader-level communications, but Jaiswal’s decision to disclose that Modi and Trump spoke eight times in a single year was deliberate. It was meant to demolish the impression that India has been diplomatically negligent or aloof.

This episode reveals a deeper issue- the Trump administration’s increasingly personalised approach to foreign economic policy. Under Trump, trade negotiations are not merely institutional or bureaucratic exercises but are frequently tied to perceptions of personal respect, loyalty, and political signalling. New Delhi’s rebuttal makes clear that it does not accept this concept.

Even more consequential is the US threat to impose punitive tariffs as high as 500 per cent on Indian exports if New Delhi continues importing Russian oil. This is not just a trade dispute; it is an attempt to coerce India into aligning with US geopolitical priorities through economic pressure.

Jaiswal’s comment that India’s energy decisions “depend on evolving dynamics in the global oil market” underscores a fundamental Indian position: energy security is non-negotiable.

Trump on Thursday greenlighted the Sanctioning Russia Act 2025 that could authorise tariffs of up to 500 percent on imports from countries that continue to buy Russian oil, including India, China and Brazil, as part of efforts to tighten economic pressure on Moscow amid the Ukraine war.

India has historically sourced around 35-40 percent of its crude from Russia at steep discounts, and Washington has already doubled tariffs on Indian exports to 50 per cent in 2025 over those purchases.

“We are aware of the proposed bill,” Jaiswal said in response to a query during his media briefing. “We are closely following the developments around the bill. Our position on the larger question of energy sourcing is well known to you and I have spoken about it in several occasions in the past as well. In this endeavour, we are guided by the evolving dynamics in the global market as also the imperative to secure affordable energy for our 1.4 billion people through diverse sources to meet their energy security needs.”

Since the Ukraine war, Russian crude has helped India stabilise domestic fuel prices, curb inflation, and protect economic growth. Walking away from these supplies would impose heavy costs on Indian consumers and industry.

From New Delhi’s perspective, Washington’s demand is unfair and unrealistic. The US itself continues to trade with countries that do business with Russia, while European nations, though cutting back, still buy Russian energy through indirect routes. Singling out India suggests a double standard on the part of Washington that New Delhi finds difficult to accept.

According to C Uday Bhaskar, strategic affairs expert and the Director of the New Delhi-based Society for Policy Studies think tank, the External Affairs Ministry is trying to place the facts in the public domain as related to 2025 and not tread on Trump’s toes. “We will know very soon if this balancing act is successful,” Bhaskar told ETV Bharat. “Another trump post on social media can be expected.”

Regarding the US’ threat to impose 500 per cent tariff on India, he said that New Delhi is signaling its resolve - again - in a non-provocative manner. “But this may not prevent President Trump from acting in an impulsive hostile manner to ‘punish’ India,” Bhaskar added.

To sum up, the External Affairs Ministry’s public rebuttal was a reminder that India is no longer willing to quietly absorb pressure in the name of partnership. It will engage Washington, negotiate hard, and cooperate where interests align – but it will not compromise on core economic and strategic priorities.

In that sense, the dispute over phone calls, tariffs and Russian oil is less a crisis than a stress test — one that will define the next chapter of one of the world’s most important bilateral relationships.

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