The Delhi-Washington Rift 🇮🇳🇺🇸

Transcripts seldom capture the full essence of speeches. The occasional notation of “pause” or “applause” does not necessarily convey the full impact.  For example, it makes no mention of the rise and fall of a voice, the deliberate pauses that hang heavy to invite a swell of applause, and the subtle exchange of emotion between the speaker and the audience.

Take the February 2020 speech of President Donald Trump in India. He had arrived in India for the first time in his presidency — a two-day trip that became the largest public reception ever staged for a visiting U.S. leader. Before a crowd of 1,25,000 at Ahmedabad’s Sardar Patel Stadium, the “Namaste Trump” rally unfolded.

The White House transcript of the President’s speech is nearly 2,900 words and occasionally notes “applause.” In reality, during the 27-minute address, Trump paused almost 60 times for the crowd’s cheers. The applause at points reached deafening decibel levels inside the stadium. 

In his speech, he said, “The First Lady and I have just traveled 8,000 miles around the globe to deliver a message to every citizen across this nation: America loves India, America respects India, and America will always be faithful and loyal friends to the Indian people.”

Narendra Modi embraced Trump at least three times throughout the hour-long event. Their final handshake came as the stadium speakers blared the Rolling Stones’ song “You can’t always get what you want…”  

Now, five years later, that line perfectly captures the current situation of the U.S. and India’s trade relations. 

On August 1, the Trump administration hit goods from India with a 25% import tariff. Just five days later, on August 6, it added another 25% — because, according to the US, India is financing the Russian war machine by buying their oil. That brings the total tariff to 50% — one of the highest to date, even higher than what’s currently imposed on China. So how did we get here? How did India, a significant U.S. trade partner, end up facing the steepest tariffs of them all?

In this issue of CrossDock, we break down the U.S.–India trade relationship over the years, the reasons behind the new tariffs, the products likely to be impacted, and the role the Russia–Ukraine war has played in fueling this tariff escalation.

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In 1947, the year India broke free from nearly 200 years of British colonial rule, the world was still reeling from the devastation of World War II. But a new kind of conflict was already brewing — the Cold War — as the U.S.-led West and the Soviet-led East bloc began shaping a new global order. Nations began choosing their sides based on the ideology they embraced. 

But India’s first Prime Minister, Jawaharlal Nehru, refused to take sides. Instead, he became a founding voice of the Non-Aligned Movement (NAM)  — a coalition of newly independent nations determined to chart their own course in global politics and economics. The downside of this strategic neutrality was that India’s trade ties in those early decades were limited. 

By the 1950s and 1960s, those constraints were felt sharply — India was facing an acute food shortage, with millions to feed and too little grain.

Enter the United States.

Under the U.S. Public Law 480 “Food for Peace” program, launched in 1954, Washington shipped millions of tons of wheat and other staples to India on concessional terms.

According to the U.S. Department of Agriculture’s 1964 Foreign Agricultural Economic Report, under Public Law 480, U.S. wheat exports to India averaged about 3 million tonnes per year from 1957–59, then rose sharply in 1960 to 4 million tonnes annually over the next four years. Public Law 480 remained in force for more than a decade, and by the time it ended in 1971, it had delivered over 60 million tons of U.S. grain to India.

Interestingly, the U.S. not only helped India overcome its food shortages, but in the 1970s it also played a significant role in making the country self-sufficient in grain production — a transformation that sparked the Green Revolution in India. 

Through the United States Agency for International Development (USAID), Washington invested in building India’s agricultural universities and research programs, while the Rockefeller and Ford Foundations linked Indian scientists with leading international research centers.

Soon, the Green Revolution dramatically increased India's food production. Wheat production soared by over 200% between 1965 and 1990, and total grain output grew from approximately 80 million tons to over 220 million tons by the 1990s.

But why was the U.S. helping India?

For Washington, it was a Cold War strategy — securing a non-Communist ally in Asia, countering Soviet influence, and planting the seeds for future trade ties.

At the same time, it was nurturing one more country in the region — Pakistan. Washington’s military and economic aid to Pakistan and its support for Pakistan during the Indo-Pak wars strained relations with India, creating decades of mistrust.

Still, by the mid-1980s, trade between the two nations had started to improve. India’s exports to the U.S. included precious stones (gold and diamonds), woven and knit apparel, organic chemicals, machinery, and textiles. 

Throughout the 1980s, India’s trade with the U.S. remained constrained — shaped by protectionist policies at home and geopolitical barriers abroad.

But all of that changed in 1991. 

1991 was the year the world order changed. The Soviet Union crumbled into 15 new nations, leaving the United States as the undisputed global superpower of the free world. 

At the same time, a balance-of-payments crisis pushed India to abandon decades of protectionism and embrace the free market. These twin events rewrote the U.S.–India script. In 1991–92, the U.S. was India’s largest export market, followed by Japan and Russia. By 1995, annual trade between India and the U.S. had grown to around $10 billion.

All was good until India dropped a bomb, literally. 

India’s nuclear tests in May 1998 — known as Pokhran-II — changed the dynamics of the U.S.–India relations. Washington swiftly imposed economic and military sanctions. Trade and investment flows slowed, though not entirely cut off. 

The sanctions were intended to harm the Indian economy, but they had no significant impact.  In fact, India's GDP growth actually increased from 4.8 percent in 1997-1998 to 6.6 percent in 1998-1999, according to India’s Ministry of Finance data. 

Imports from India rose sharply across nearly every category, with energy products jumping more than 400%, and much of the surge was driven by just a few goods: gemstones, petroleum, and medicinal chemicals. 

In years that followed, subsequent U.S. administrations worked to deepen ties with India through bigger defense deals — from C-17 transport aircraft to P-8I patrol planes — and economic partnerships. By 2021, the US became India’s number one trading partner, a position it has held for four consecutive years. 

In 2024, U.S.–India trade reached $212.3 billion, up 8.3% from the year before. Goods accounted for $128.9 billion of that — $41.5 billion in U.S. exports to India and $87.3 billion in imports — leaving a $45.8 billion trade deficit. Services trade, nearly evenly split between $41.8 billion in exports and $41.6 billion in imports, turned around into a modest $102 million surplus for the U.S. 

After decades of growing economic ties, India now stands as the United States’ 10th-largest trading partner. India assumed that years of close ties and Prime Minister Modi’s rapport with President Trump would shield it from his tariffs in his second presidency.

When President Trump began rolling out tariffs in his second term, India’s prospects initially looked bright. Early talks between President Trump and Prime Minister Modi set an ambitious goal: expand bilateral trade to $500 billion by 2030. Details were scarce on how that target would be met, but Modi publicly said he expected a deal to be signed later in the year.

Interestingly, Trump also echoed the same excitement. “We’re having some great deals. We have one coming up, maybe with India, a very big one, where we’re going to open up India,” he said 

At the same time, Washington’s escalating tariffs on China presented India with a golden opening. Higher U.S. duties on Chinese electronics, furniture, and industrial components created space for Indian exporters to step in.

In New Delhi, trade planners began mapping sectors — from engineering goods to home textiles — where India could seize market share in disrupted U.S.–China supply chains.

Then the script flipped. In August 2025, the Trump administration shelved the trade deal and instead went in the opposite direction — slapping a 25% tariff on Indian goods, then doubling it to 50% within just five days.

So what caused this? Let’s break it down.

Trump has repeatedly called India the “tariff king,” and in a recent Truth Social post said some of India’s tariffs are “far too high, among the highest in the world,” and that the country has “the most strenuous and obnoxious non-monetary trade barriers of any country.” And hence the growing US trade deficit with India. 

A big part of that complaint comes down to agriculture and dairy — two sectors where U.S. exporters have long pushed for more access. For example, in the U.S., Apples face a 50% tariff, walnuts up to 120%, and almonds anywhere between 42% and 120%. Dairy imports carry duties of 30–60%, plus strict rules requiring certification that producing animals have never been fed ruminant-derived feed — a standard that effectively keeps most U.S. dairy out.

New Delhi insists these aren’t unfair barriers but necessary protections. That is because farming still supports about 45% of India’s workforce, and dairy is deeply tied to the country’s culture and rural economy. 

In India, lowering tariffs or loosening import rules for agricultural and dairy goods is widely seen as political suicide. Farmers make up roughly 45% of the country’s labor force and form one of the most influential voting blocs for any government, especially Prime Minister Narendra Modi’s BJP. 

The danger isn’t theoretical — in 2020, when the BJP pushed through farm laws that economists praised but farmers feared would cut their earnings, the result was 16 months of protests, highway blockades, and electoral losses in key states. The government ultimately scrapped the laws, marking one of Modi’s few major political defeats.

In fact, these are not new issues. Trump used this as justification to strip India of its Generalized System of Preferences (GSP) benefits in June 2019, ending duty-free access for over 2,000 products worth about $5.6 billion a year.

Now let’s move on to the next problem. The additional 25% tariff announced in August was aimed squarely at one target: India’s continued imports of Russian oil.

When Russia invaded Ukraine in early 2022, most European buyers rapidly cut their purchases, forcing Moscow to seek new markets. For India — a country that imports nearly 80% of its crude needs — it was an opportunity too big to ignore. 

Before the war, Russian barrels accounted for barely 1% of India’s imports. Within months, that share surged, peaking at around 2 million barrels per day in 2022 — roughly 2% of global supply. Currently, Russian oil makes up about 35–40% of India’s total crude needs. 

In April this year, Kpler market data showed Indian imports of Russian crude likely hitting 2.15 million barrels a day, the highest volumes since May 2023.

One major reason India buys Russian oil is its price. Russian crude is sold to India at discounts of $1–2 per barrel below global benchmarks, sometimes lower when markets turn volatile. Those savings helped India keep domestic fuel prices in check and boosted refinery margins.

The second — and perhaps most ironic — reason India ramped up Russian crude purchases is that Washington wanted it to.

In the months after Russia’s 2022 invasion of Ukraine, global oil markets were in turmoil. European buyers were shunning Russian crude, and prices were climbing fast. Brent crude briefly topped $130 per barrel in March 2022 — the highest in more than a decade. 

To prevent a full-blown energy shock, the U.S. and its allies crafted a price-cap mechanism that allowed non-European buyers to keep importing Russian oil, so long as it traded below the cap.

This arrangement, in fact, had the direct blessing of the Biden administration.

One might argue that it was the previous administration’s stance, and this might not reflect the current government’s strategy. 

But the current administration is still trading with Moscow. According to U.S. International Trade Commission data, American imports from Russia rose 23% year-on-year to $2.1 billion between January and May 2025. The surge was driven by significant increases in palladium (up 37%), uranium (up 28%), and fertilizers (up 21%).”

If buying Russian oil is the issue, then China, now the largest buyer of Russian oil, is the first on the list. The US has not levied tariffs on China for this; in fact, the 30% tariff on China has been extended for the next 90 days, 20% lower than what is levied on India. 

So, how has India reacted to the tariffs, and what could be the potential damage on both sides? 

India’s Foreign Secretary Vinay Mohan Kwatra called the 50% tariff hike “unwarranted and inconsistent with the spirit of our strategic partnership”, stressing that New Delhi would “take all necessary steps to safeguard our economic interests and protect our exporters.”

Economists warn that the impact will be felt on both sides of the ocean. 

Moody’s estimates India’s GDP growth could dip by 0.3 percentage points in FY 2025–26, while Morgan Stanley puts the potential drag as high as 0.8 points if the duties remain in place for an extended period. 

On the other hand, S&P Global is more optimistic, noting that exports to the U.S. make up just 2% of India’s GDP, and with exemptions for smartphones and pharmaceuticals, growth could still hold around 6.5%.

The pain, however, is not one-sided. 

The United States will see higher prices for many everyday and luxury goods sourced from India. About 30% of India's gems and jewelry exports go to the U.S., accounting for about $10 billion in annual trade. Diamonds, gemstones, and jewellery — over a third of which come from India — will become more expensive, pushing up the cost of engagement rings, luxury watches, and fine jewellery in American stores. 

Carpets, home furnishings, and ready-made apparel from India will also see price hikes, particularly in mid-range and premium retail chains that depend on Indian cotton and handloom products.

The seafood trade will feel the pinch as well, with nearly half of U.S. shrimp imports originating from India; wholesalers, restaurants, and grocery chains will face higher costs that are likely to be passed on to consumers. 

Leather goods, from handbags to premium footwear, will carry price tags inflated by effective tariff rates above 50%, while specialty chemicals and dyes — essential inputs for American textiles, paints, and pharmaceuticals — will also become more costly for U.S. manufacturers.

The tariffs can also have an effect on supply chains. Let’s break it down.

Imposing steep tariffs on Indian goods risks eroding the progress made under the U.S.’s “China-plus-one” strategy—a policy aimed at diversifying manufacturing away from overreliance on China by shifting production to alternative hubs like India, Vietnam, and Mexico. 

It is not just iPhones, in the broader electronics segment (including mobile phones and solar cells), India’s share of U.S. imports rose from 3.5% to 7.2% year-on-year as of May 2025, while China’s share dropped from 22% to 11%. 

In advanced technology products, India’s share grew from 2.3% to 3.5%, while China’s declined dramatically, from 14.5% to 5.8%. In textiles, China’s share of U.S. imports dropped from 27% in June 2024 to just 14% by May 2025, while India’s share rose from 9% to 12% over the same timeframe.

In short, a blanket tariff of 50% would make Indian exports far less competitive, potentially driving U.S. importers to either revert to Chinese suppliers or incur higher costs from less-developed manufacturing bases. That could undercut years of supply chain realignment, increase sourcing costs for U.S. companies, and slow efforts to build resilient, geopolitically balanced production networks.

Imposing a 50% tariff on India — the world’s fifth-largest economy and a major player in Asia — could end up hurting the U.S. in more ways than one. Instead of pushing New Delhi to change course on Russian oil, it may push India closer to countries that are not exactly friendly to Washington’s interests. 

And that shift is already taking shape. 

India is in talks with Russia to revive and expand trade. Prime Minister Modi is expected to visit China later this year. And India has committed to strengthening ties with Brazil, which is also facing a 50% U.S. tariff.

For the U.S., this is a worrying direction. Russia and China are America’s main strategic rivals, and bringing India closer to them would undo years of work to build trust and cooperation. These tariffs won’t just affect trade numbers — they could change how India aligns itself in global politics, leaving the U.S. with less influence in Asia at a time when it needs reliable partners. 

Next week in CrossDock: We look at how the U.S. and BRICS are heading for a fresh showdown, with a new wave of alignment emerging between Russia, China, and India and Brazil — and what this means for global trade and power dynamics.

This newsletter was written by Shyam Gowtham

Thank you for reading. We’ll see you at the next edition!