US Tariff Threat Escalates: 500% Tariff Threat Looms Over India
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- Last Updated: 09 Jan 2026 at 3:19 PM IST
A new front in global trade tensions opened this week after US President Donald Trump approved a bill that could hit India and other major oil importers with punitive duties as high as 500%. The bill is to pressure countries that continue buying Russian energy.
US Senator Lindsey Graham told reporters the bill would let the US punish nations that buy cheap Russian oil. He described it as a step that would give the US tremendous leverage over major energy buyers. In hindsight, the bill targets India, China, and Brazil for importing discounted petroleum from Moscow amid the four-year war in Ukraine.
The bill, formally known as the Sanctioning Russia Act of 2025, has cleared an early hurdle with Trump’s endorsement and now heads for broader consideration in Congress. While it still needs approval from lawmakers before becoming law, the White House’s support signals a significant shift toward harsher trade penalties on countries that continue to do business with Russia.
500% Tariff Threat Unsettles India Trade
Under the bill’s text, the US could impose tariffs of at least 500% on all goods and services imported from any country that continues significant trade in Russian oil, natural gas, uranium, or petroleum products. The duties will kick in if the US determines that Russia has refused to negotiate peace with Ukraine.
In New Delhi, government officials are bracing for the fallout. Notably, India’s imports of Russian crude jumped sharply after Western sanctions initially targeted Moscow’s energy sector in 2022. Russia emerged as India’s biggest crude supplier after the Ukraine war. Moscow accounted for around 35–40% of India’s oil imports. That was a sharp jump from roughly 0.2% before the conflict began.
Far-Reaching Impact
Market participants believe the bill’s implications could be far-reaching. They feel it could dent Indian exports to the US in key segments. Also, India’s energy import bill could climb sharply if the country pivots away from cheap Russian barrels toward costlier Middle Eastern or US supplies.
Awkward Timing
The timing of the bill is awkward for the Indian government. India has already been trimming its dependence on Russian crude since Washington slapped 25% tariffs in August last year. Shipments from Russia have been falling since September 2025. Official trade data shows imports dropped by more than 18% between April and October last year compared with the same period a year earlier.
India is already staring at tariffs of up to 50% on shipments to the US, a blow that makes it the worst-hit country so far. The higher duties have already weighed on exports to one of India’s largest markets and have begun to cool investment flows as well.
As Washington weighs tougher sanctions, the challenge for India will be to balance its energy security needs with growing trade and geopolitical pressures from its largest export market.
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