How US Tariff Reversal and Russian Oil Gambit Transformed India-US Trade
The US Supreme Court's tariff ruling and India's strategic retreat from Russian oil reshaped India-US trade. India sacrificed its cheap Russian crude, leading the US to significantly reduce tariffs on Indian goods, including textiles, gems, and potentially pharmaceuticals. This sets the stage for a projected $530 billion bilateral trade relationship. However, the interim deal is non-binding, requiring robust future negotiations to secure permanent protections against potential US executive actions and realize the full trade potential.
The US Supreme Court's decision to strike down Donald Trump’s sweeping global tariffs under the IEEPA on February 20th profoundly impacted India’s trade landscape. This ruling, coupled with India's fortnight of intense trade diplomacy, including a newly forged interim framework with Washington, has opened an unprecedented opportunity for a $530 billion bilateral trade relationship. Central to this shift was India’s significant geopolitical sacrifice: a formal commitment to halt purchases of Russian oil, which had peaked at nearly 40% of its imports.In return for abandoning its strategically advantageous energy relationship, the US removed an additional 25% punitive tariff and reduced the reciprocal tariff on Indian goods from 25% to 18%. Critically, the interim agreement paves the way for zero-duty access for key Indian exports like pharmaceuticals, gems, and certain aircraft parts. This brings immense relief to labor-intensive sectors such as textiles, garments, and diamond polishing, which had faced up to 50% tariffs. India also secured strong protections for its agriculture and dairy sectors, resisting genetically modified imports while gaining zero tariffs on its own spices, tea, and coffee.Despite these gains, the interim framework is not legally binding. Upcoming negotiations for a comprehensive Bilateral Trade Agreement (BTA) must solidify these concessions into durable legal text. Challenges remain, including potential US executive actions like Section 232 investigations (especially concerning pharmaceuticals) and Section 301 tariffs, as well as contentious issues like digital trade levies and intellectual property rights. India's goal is to convert its geopolitical goodwill into iron-clad protections, ensuring the projected trade growth is secured against future policy shifts.
