Trump’s Tariffs and UK Sanctions Squeeze India’s Economy Amid Global Trade Turmoil

The ripple effects of former President Donald Trump’s aggressive trade policies and the UK’s latest sanctions on Russian oil are converging in an unexpected way: India is caught in the crossfire. As Washington and London escalate their economic offensives against geopolitical adversaries, New Delhi finds itself grappling with plummeting exports, strained bilateral relations, and a precarious balancing act between its historical allies and its strategic interests.

Trump’s decision to impose 50% tariffs on Indian goods, including a 25% penalty for India’s continued purchases of Russian oil, has sent shockwaves through the Indian economy. September marked the first full month of these tariffs, and the results were stark. India’s exports to the U.S., its largest trading partner, dropped by 20% in September alone, with a staggering 40% decline over the past four months.

“The U.S. has become India’s most severely affected market since the tariff escalation began,” said Ajay Srivastava of the Global Trade Research Initiative, a Delhi-based think tank. The tariffs, which kicked in on August 27, are part of Trump’s broader strategy to pressure India into halting its oil imports from Russia—a move that has become a flashpoint in U.S.-India relations.

Meanwhile, the UK is tightening the screws on Russia’s oil market with a new package of 90 sanctions, targeting not only Russian oil companies but also major Indian oil refineries and Chinese oil terminals. Chancellor Rachel Reeves framed the sanctions as a critical step to undermine Russia’s ability to fund its war in Ukraine, but the collateral damage is undeniable. The Russian embassy in London warned that these measures would disrupt global fuel supplies and drive up costs worldwide—a sentiment echoed by Indian officials who fear the economic fallout.

India’s predicament is emblematic of a broader trend: the weaponization of trade in an increasingly fragmented global order. For years, Washington has sought greater access to India’s agricultural sector, viewing it as a lucrative untapped market. Bilateral trade between the two nations reached $190 billion in 2024, but Trump’s tariffs have upended this relationship.

Negotiations for a new trade deal are underway, with both sides aiming to conclude an agreement by next month—but the stakes are high. India’s reluctance to sever ties with Russia, a key supplier of discounted oil, underscores its commitment to strategic autonomy, even as it risks alienating its Western partners.

The economic toll on India is compounded by the global market’s volatility. Stock markets worldwide are grappling with the fallout from Trump’s trade escalations, particularly his threats to impose additional tariffs on Chinese goods. The Dow Jones Industrial Average plunged 300 points on Thursday, with regional banks hit hard by concerns over bad loans. This instability mirrors the broader uncertainty surrounding Trump’s trade policies, which have become a defining feature of his political resurgence.

As India navigates this turbulent landscape, the political calculus is fraught with tension. Prime Minister Narendra Modi’s government must weigh the economic benefits of maintaining ties with Russia against the diplomatic and financial costs of alienating the U.S. and its allies. The coming weeks will be pivotal, as trade negotiations with the U.S. reach a critical juncture and the impact of the UK’s sanctions becomes clearer.

In a world where trade is increasingly wielded as a weapon, India’s struggle highlights the complex interplay of economics, politics, and power. The decisions made in New Delhi, Washington, and London in the coming months will not only shape India’s economic future but also signal the direction of global trade in an era of geopolitical upheaval.