US and India open trade talks to resolve tariffs linked to Russian oil imports.

US and Indian trade negotiators have begun two days of talks in an effort to reach a trade deal, amidst ongoing geopolitical turbulence. The discussions come several months after Washington imposed significant tariffs on New Delhi, specifically targeting its purchases of discounted Russian oil. These tariffs, which levied a 50% charge on most goods, were implemented in August. US officials justified the move by arguing that India’s imports of discounted Russian crude effectively bankroll Moscow's war in Ukraine. The visit by Deputy US Trade Representative Rick Switzer coincides with heightened geopolitical scrutiny following Prime Minister Narendra Modi's recent meeting with Russian President Vladimir Putin in New Delhi. India's foreign ministry has described Switzer's meetings as a "familiarisation" trip.

India was among the first countries to engage in trade talks after President Donald Trump announced sweeping tariffs on most US trade partners in April. However, despite being the world's fastest-growing major economy, India remains one of the few major economies without a new trade agreement. This delay creates risks for economic growth, markets, and job creation within India. The country recorded a $45.8 billion goods trade deficit with the US in 2024. While large export categories like smartphones and generic drugs are exempt from Trump's tariffs, many labor-intensive industries are not. This poses a serious challenge for a nation striving to generate well-paid jobs for millions of young graduates, threatening Modi's ambition to elevate the country to high-income status.

The economic impact has been severe. Exports fell nearly 12% year-on-year in October, primarily driven by a plunge in shipments destined for the US. According to estimates by the Global Trade Research Initiative (GTRI), labor-heavy sectors—including gems and jewellery, textiles, and seafood—experienced export drops ranging from 37% to 60% between May and September. The turmoil has also affected financial markets, with foreign investors dumping over $16 billion in Indian equities this year, contributing to the rupee hitting a record low past 90 per dollar. The International Monetary Fund (IMF) has also cut India's 2026-27 growth forecast from 6.4% to 6.2%, explicitly assuming "prolonged 50% US tariffs." The GTRI projects that exports could shrink to approximately $49.6 billion this fiscal year, down significantly from $86.5 billion last year, potentially reducing economic growth by up to 80 basis points.

The core issue stems from India's enthusiastic purchase of discounted Russian crude following the 2022 invasion of Ukraine. While Moscow faced severe international sanctions, India significantly increased its imports. However, Trump's decision in August to link trade policy directly to geopolitics upended US-India relations, with roughly half of the new tariff burden stemming from Washington's attempt to penalize those purchases. The US president has repeatedly claimed that India either plans to stop, or has mostly stopped, buying Russian oil—a claim New Delhi has neither confirmed nor denied. During his recent visit to the Indian capital, President Putin offered to "continue uninterrupted shipments of fuel," though Modi did not comment directly on the matter.

Despite the official silence from New Delhi, recent shifts among private companies suggest a potential change in import patterns. Top buyer Reliance Industries announced in November that it had stopped importing Russian oil for its export-focused refinery, while smaller refiners like HPCL-Mittal Energy stated they have stopped entirely. Analysts at the trade intelligence platform Kpler expect a "notable dip" in India's December-January imports as a result. However, whether this decline will be sufficient to sway Washington remains unclear. Negotiating a trade pact is further complicated by the need to address Trump's so-called reciprocal tariffs, though officials acknowledge that both issues are linked. Commerce Secretary Rajesh Agrawal noted that while these are "two separate, parallel negotiations that are going on, one will feed into another."

Relations have shown improvement since August, with several smaller deals advancing between the two countries. These include the US approval in November for two arms sales valued at nearly $93 million. Additionally, New Delhi secured a "significant" deal for the US to supply nearly 10 percent of its liquefied petroleum gas (LPG) imports. Energy commitments have historically anchored past US trade agreements, and experts suggest the LPG contract may help convince Washington that India is genuinely reducing its reliance on Russia as an energy source.