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The U.S.-India Trade Spat Boils Over

August 6, 2025
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The U.S.-India Trade Spat Boils Over
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Welcome to Foreign Policy’s South Asia Brief.

The highlights this week: U.S. President Donald Trump imposes an additional 25 percent tariff on India, Bangladesh marks one year since mass demonstrations led to former Prime Minister Sheikh Hasina’s ousting, and supporters of former Pakistani leader Imran Khan protest in Pakistan.


Trump Ups the Ante on New Delhi

The United States and India are embroiled in an ugly confrontation over trade and tariffs—and there’s no end in sight. On Wednesday, U.S. President Donald Trump followed through on his earlier threat and announced an additional 25 percent tariff on India, citing its continued purchase of Russian oil. The new levy comes on top of an existing 25 percent tariff that Trump announced last week. The total tariffs on India are notably higher than those imposed on India’s neighbors, including Pakistan (19 percent) and Bangladesh and Sri Lanka (20 percent each).

Indian officials have signaled that they currently have no plans to stop buying energy from Russia. New Delhi has argued that its targeting by Washington and Brussels is “unjustified and unreasonable.” After all, China purchases more Russian crude than India, but it has not been specifically targeted. In addition, New Delhi believes it has already done more than enough to address U.S. concerns and has argued that it was buying Russian oil under a G-7 approved price cap that also helped stabilize global energy prices—a position that was loosely endorsed by the Biden administration.

Since then, New Delhi has tried to appease Washington on other fronts. It has reduced its share of arms imports from Russia and increased imports of U.S. oil, while also dramatically reducing imports from Iran and Venezuela. And, as New Delhi likes to point out, this is all while both the European Union and United States continue to import Russian goods. Indian Prime Minister Narendra Modi’s government has also made other concessions to the Trump administration, including preemptively reducing some tariffs and taking back dozens of undocumented Indian workers.

Russia is one of India’s oldest and most trusted partners, as well as a crucial supplier of economic and military assistance—even with India strengthening ties with Washington and European capitals in recent years. New Delhi likes to say it doesn’t turn against its friends. Russia will be no exception.

And then there’s the economic factor. Cheap Russian crude makes up roughly 35 percent of the India’s oil imports. Energy experts say that turning to non-Russian sources could add as much as $11 billion to New Delhi’s import bill.

But with Trump upping the ante to a whopping total of 50 percent tariffs on India, the walls are closing in on Indian policymakers: If they decline to divest from Russia, they could face considerable economic pain.

This leaves New Delhi with difficult choices. It can expand ongoing efforts to ink new trade deals with other countries to secure greater market access and reduce U.S. tariff damage. India is currently in talks with the European Union—another top export market—to complete a free trade agreement. But these negotiations are complex and can take time.

New Delhi can renew earlier efforts to prod Russia to stop fighting in Ukraine. Trump would likely pressure India less on Russian oil if Moscow were no longer waging a war that Trump badly wants to end. However, earlier calls for peace by India didn’t succeed. And Trump may not like India taking on a mediation role that he wants his administration to lead on, suggesting the risk of further tensions.

India can also continue to pursue a deal with Washington. But this could be risky politically for New Delhi, given broader tensions in U.S.-India relations, and it would be uncomfortable making more concessions. Modi has already urged Indians to buy local amid an “atmosphere of instability.”

In the early days of the second Trump administration, Indian officials professed confidence in their ability to work with the mercurial and unpredictable Trump. But with tariffs having become a severe bilateral flashpoint, the U.S.-India relationship now arguably faces its biggest test over the last two decades. New Delhi must navigate the tariff crisis and keep the relationship afloat—all while managing the whims of the U.S. president.


What We’re Following

One year since Hasina’s fall. On Tuesday, Bangladesh marked one year since mass protests prompted longtime Prime Minister Sheikh Hasina to resign and flee to India. Hasina’s departure came after weeks of student-led demonstrations against her authoritarian rule, which prompted the country’s security forces to brutally crack down on protesters, resulting in the death of more than 1,400 people. Hasina’s ouster has had massive political implications in a country that was ruled by her Awami League party for more than 15 consecutive years.

Today, Bangladeshis are generally happier and freer than they were during the Hasina era, but the post-revolution honeymoon is a distant memory. The country’s interim government, led by Nobel laureate Muhammad Yunus, has struggled to stabilize the economy and strengthen law and order. Meanwhile, as Salil Tripathi writes in Foreign Policy this week, the country’s cycle of retributive politics has continued to persist.

Indeed, many protest leaders—some of whom served in the interim government before leaving earlier this year to form a new political party—have insisted on following through on ambitious structural reforms promised immediately after Hasina’s fall. But progress has lagged, leaving many Bangladeshis frustrated. On Tuesday, Yunus announced that the country will hold elections next February. Bangladesh hasn’t experienced free and fair elections for a long time, and next year’s polls will mark a major test for a post-Hasina Bangladesh.

Protests in Pakistan. On Tuesday, Pakistani police arrested more than 200 people as thousands of former Prime Minister Imran Khan’s supporters took to the streets to protest against his imprisonment. After losing power in a parliamentary no-confidence vote in 2022, Khan turned on his former benefactors within Pakistan’s powerful military, resulting in a massive crackdown on himself, his Pakistan Tehreek-e-Insaf (PTI) party, and his large support base. He was eventually jailed in 2023 on corruption charges, an accusation that his supporters reject as politically motivated.

Tuesday’s turnout, while relatively modest, is impressive given the scale of the crackdown on Khan’s backers. With Khan in jail, PTI’s remaining leadership has struggled to adjust, and street mobilizations are difficult to muster. Most of the party’s noise has been made abroad, where expatriate PTI supporters have protested in large numbers—but without any ability to change the calculus back in Islamabad.

The Pakistani Army, which regained some public goodwill following the latest military clash with India in May, continues to hold all the cards. The governing coalition is helmed by leaders, including Prime Minister Shehbaz Sharif, who are happy to defer to the military. Meanwhile, Pakistan’s generals have bolstered ties with key allies, including Washington.

Kashmir, six years on. Tuesday marked six years since the Indian government revoked Article 370, which granted special autonomous status to Jammu and Kashmir. The decision resulted in the region becoming a union territory of India, bringing Indian-administered Kashmir under the full control of Prime Minister Narendra Modi’s government.

New Delhi has defended the change as a purely administrative one that would help bring more stability and prosperity to the contested region. But many residents of Kashmir, especially in the Kashmir Valley, as well as Islamabad in nearby Pakistan—which rejects India’s administration of the region—have denounced it. On Tuesday, hundreds marked the anniversary by organizing protests in Pakistan-administered Kashmir. Meanwhile, in Srinagar, a city in Indian-administered Kashmir, opposition members urged the central government to restore the region’s statehood.

Even though the region remained heavily militarized, the first few years after Article 370’s revocation did bring some relative calm and “normalcy” to Kashmir, as New Delhi has argued. However, this narrative was undermined when a terrorist attack in April, which New Delhi blamed on militants linked to Pakistan, killed 26 tourists in the Pahalgam area of Kashmir.

Senior Indian officials, including Modi, have recently signaled their willingness to restore Kashmir’s statehood, albeit with no indication of a timeframe. India’s Supreme Court is scheduled to weigh in on the issue on Aug. 8.


Under the Radar

Philippine President Ferdinand Marcos Jr. is in India on a five-day state visit this week. On Tuesday, he met with Indian Prime Minister Narendra Modi, and the two countries agreed to upgrade their bilateral ties and announced a strategic partnership. This isn’t a surprise; in recent years, New Delhi’s relationship with Manila has quietly blossomed into one of its strongest in Southeast Asia—and in ways that can also be beneficial to U.S.-India relations. In April, New Delhi sent supersonic cruise missiles to Manila to help the Philippines counter Chinese aggression in the South China Sea.

This represents a case of India acting as a net security provider in the Indo Pacific and helping advance U.S. strategic interests, which is an example of the burden-sharing that the Trump administration expects of its allies and partners. In that sense, Marcos’s visit to India is important not just for the latter’s foreign policy, but also for the United States. But with Washington so heavily focused on tariffs and India’s ties to Russia, the visit might not get the attention it deserves.


FP’s Most Read This Week

  • When the Threat Is Inside the White House by Tim Weiner
  • Tehran’s Wake‑Up Call for Beijing by Grant Rumley and Craig Singleton
  • Trump Is Pushing India to Submit to China by Sushant Singh 

Regional Voices

A Daily Mirror editorial offers advice to Colombo on how Sri Lanka should respond to U.S. tariffs: “Our own country needs to look for markets within our own region and with BRICS. Asia is in fact the biggest market … Africa is a new market which is opening up and we need to look to these two sources for mutual help and development.”

In Prothom Alo, economist Selim Raihan discusses the implications of Bangladesh receiving a 15 percent reduction in the reciprocal tariff rate from Washington. While the reduction is “encouraging, it does not raise any option for self-complacency,” Raihan argues. “Bangladesh must act decisively now to establish a diversified, competitive, and resilient trade strategy.”

For The Print, journalist Vir Sanghvi asks why India feels a “sense of betrayal” about U.S. President Donald Trump’s embrace of Islamabad, given all the U.S.-Pakistan dalliances of the past. India’s leaders had “acted as though Trump was one of them,” Sanghvi writes, referring to  the U.S. president’s embrace of anti-Muslim rhetoric. “In truth, Trump and his Indian fan club had nothing in common.”

The post The U.S.-India Trade Spat Boils Over appeared first on Foreign Policy.

Tags: Donald TrumpEconomicsIndiaNarendra Modioil productionRussiaTariffsTrade Policy & AgreementsU.S. Economic SanctionsUnited States
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