Regardless of how courts ultimately rule on their legality, and whether the administration finds other avenues, U.S. President Donald Trump’s tariffs have already triggered an impressive diversity of responses. The EU has mostly folded; China has found leverage in its horde of rare-earth minerals; Brazil has stood its ground. Brazil’s companion at the top of the tariff table, India, has gone long on the symbolism. But New Delhi’s next step must be more pragmatic—and more substantive.
On Aug. 27, India’s 50 percent tariff rate kicked in. Half of that rate, ostensibly, is punishment for doing business with Russia, though it’s possible that all of it is retaliation for failing to help advance Trump’s candidacy for the Nobel Peace Prize. Four days afterward, Indian Prime Minister Narendra Modi flew to China. Notably, it was his first visit there in seven years. There were friendly photo ops with Russian President Vladimir Putin and Chinese President Xi Jinping. Modi also made it a point to spend 45 minutes closeted with Putin in the Russian president’s idling limousine. (Meanwhile, he hasn’t spoken with Trump since a testy phone call on June 17, and Trump is reportedly not attending the Quadrilateral Security Dialogue summit later this year.) The message was unmistakable: India may not have rare-earth minerals for leverage, but the country is not without friends.
Back home, consumers are being encouraged to “Buy Indian”; a government plan to lower of the goods and services taxes aims to boost sales during the October Diwali holidays; officials are scouring new export markets across 50 countries. Op-eds in levelheaded newspapers, such as the Hindu, have lauded the government for responding with “maturity and pragmatism.”
Indeed, it was pragmatism that drove India to doing business with Russia in the first place, even as much of the world was recoiling from Putin after his invasion of Ukraine. Making his case for buying Russian oil, External Affairs Minister S. Jaishankar declared in August 2022 that “it is my moral duty—my obligation—to ensure I get the best deal I can from the world.”
Back then, buying Russian oil may have been the “best deal.” But with Trump’s tariffs in place, the math has, no doubt, moved. A true pragmatist would ask: How does the cost of doing business with Russia compare with the cost of not doing business with Trump?
The answer may come as a surprise—and is an important starting point for plotting Modi’s next move.
Back in 2022, Russian crude was selling at a discount of about $20-$35 less per barrel than Brent crude. That gap has narrowed; even with the post-tariffs price cut, the discount is down to $3-$4 per barrel. Averaging across fat and thin discount periods, the State Bank of India estimates the country’s the oil import bill rising by $9 billion to $12 billion annually if India pivots away from Russian oil.
Trump’s other complaint is that India buys Russian weapons. Pragmatism rears its head again: Russian arms are cheaper. However, this case is less compelling. As Russian supplies of spares and munitions have been plagued with delays since the Ukraine invasion, India is already approaching other sources. Russia supplied 36 percent of India’s arms imports from 2019 through 2023, and using figures from the Indian Defense Ministry’s modernization budget, which indicates that 25 percent of the military’s modernization budget is earmarked for imported arms, we arrive at a figure of approximately $1.6 billion each year that India pays for Russian weapons. Even if we assume that the costs would double if India bought weapons elsewhere, then the added cost would be, at most, an extra $1.6 billion per year.
Putting the bills for energy and weapons together, a pivot from Russia has an annual cost of approximately 0.2 percent to 0.3 percent of India’s GDP, which is about $4.2 trillion.
Next, consider the cost of the Trump tax—and how much could be avoided by pivoting from Russia.
U.S. imports of goods from India were worth $86.5 billion in 2024; some of the top sectors—pharmaceuticals, smartphones, and other goods—are exempt from the tariffs. Exports at risk amount to $48.5 billion, according to the Indian government. The resulting loss to India’s GDP is estimated to be between 0.3 percent and 0.6 percent.
To recap, pivoting from Russia would cost roughly 0.2 percent to 0.3 percent of India’s GDP, and ignoring Trump would cost 0.3 percent to 0.6 percent of its GDP. If pivoting from Putin brings the 50 percent tariffs down to 25 percent, then the avoided tariffs costs would approximately be half the estimated tariffs loss—that is, 1.5 percent to -0.3 percent of India’s GDP.
In other words, the two options are a wash in pure economic terms. These are rough estimates, but they give us a basis for calculating today’s “best deal.” The economic equivalence places Modi’s dilemma in even sharper contrast.
One way of reading this is to say that it doesn’t really matter what Modi does next, so he might as well stick with the devil he knows: Putin. And Trump may not even care about his next move, as it’s possible that neither geopolitical nor economic factors had any role to play in the tariffing of India.
But since the numbers are a wash, other important considerations become relevant.
First, Modi’s guiding priorities ought to be the domestic economic and political agenda. While rebuffing Trump offers a short-term political high, that rush will fade quickly when hard realities hit home. The industries affected by the tariffs, such as textiles, gems and jewelry, and engineering goods are labor-intensive. With its severe jobs crisis, India can hardly afford to have more prominent industries shedding workers. The youth employment crisis is a political liability for Modi; the unemployment rate among 20- to 24-year-olds at the time of the last election was 44.9 percent, and it contributed to his worse-than-expected performance. The added unemployment will increase the costs of not doing business with Trump.
A strong alliance with the United States is critical to India’s job-creation needs. For one, there are few alternatives to a robust manufacturing sector as a labor absorber—and demand for manufactured goods will come mostly from growing demand in large markets such as the United States. Alternatively, others argue that India is late to the manufacturing race and that it is high-value services that will steer India toward jobs growth and development. But the United States is critical for growth in demand for high-value services, too.
Besides jobs, India needs foreign investment, and agreements for technology transfers that could catalyze industrial and digital transformation are most likely to come from nations such as the United States. Neither Russia nor even China and the European Union offer realistic alternatives.
India and the United States have mutual geopolitical interests, whether it is in acting as a check on China or regarding a wider multilateral agenda. In the South Asian arena, India cannot afford a full-blown reigniting of U.S. leaders’ love for Pakistani strongmen.
Of course, the tariff crisis has prompted Indian exporters to seek diversification in their destinations, but this is by no means a solution to the U.S. loss. For one, finding substitutes for U.S. consumers takes time. Secondly, it is hard to make up for the loss of a market that represents 20 percent of India’s exports and was poised to grow even larger before the crisis.
If there is indeed a bridge to be built back to the White House, it is a tightrope: India must rebuild the relationship with Trump in way that is politically acceptable at home and abroad while avoiding a hard pivot from Russia so as not to appear that he’s ditching an old ally. The migration from Russian oil could be phased with monthly publishing of a declining percentage of Russian crude in India’s oil imports. A verifiable reduction in Russian exposure strengthens the case for Indian negotiators to press for tariff relief; the relief needs to be confirmed before India actually makes the pivot, of course.
The subtleties of communication of the pivot are important: To the Trump team, it’s a signal of India partnering to secure peace—and calling attention to Trump’s actions directly putting some pressure on Putin. To the Russians, it would be age-old Indian pragmatism in a post-tariff world, rather than abandonment. Russia and India can continue as partners in nonstrategic areas to preserve the historical relationships while acknowledging today’s realities.
To the Indian public, the message would be about the relentless pursuit of jobs and “Viksit Bharat,” or “Developed India,” above all else.
Then there’s the question of how Modi’s opening with China affects the tightrope walk. Improved relations with both the United States and China are better for India, as they provide the ideal hedge.
According to some estimates, India stood to gain as much as $60 billion per year if in 2020 it had joined the Regional Comprehensive Economic Partnership, the world’s largest trade bloc, of which China is the driver. Joining the bloc had been ruled out by India, ostensibly because of China’s opaque practices, but the recent frictions with the United States have created an opening for a rapprochement. If better relations and even one-tenth of the $60 billion of value were gained, that would be a win. Modi’s key strategic objective here is to ensure that any opening with China is not tied to whether India pivots from Russia or reestablishes ties to the United States. India and China have their independent reasons to reengage.
But now that the dramatic moves of photo ops are done, it is time for the pragmatic next moves.
As Jaishankar reminded his audience at the 78th session of the U.N. General Assembly in 2023, “All nations pursue their national interests. We, in India, have never seen that as being in contradiction with global good.”
Buying Putin’s blood-soaked oil and weapons was, sadly, a glaring contradiction of this high-minded statement. Trump has done the minister—and Modi—a favor. The tariffs crisis presents India with a chance to finally align national interest and global good. And there’s no shame in letting Trump know it.
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