On Monday, President Donald Trump announced he would be reducing tariffs on Indian goods, contingent in part upon a pledge to cease purchasing oil from Russia.
This promises to be a challenging endeavor: India currently imports around 1.5 million barrels of Russian crude daily—even months after Trump initially imposed tariffs on Indian products as a punitive measure—according to Kpler, a global trade data provider. Russian oil accounts for more than a third of India’s total imports.
Trump shared on social media that he had conferred with Indian Prime Minister Narendra Modi on Monday morning, who reportedly agreed to substitute imports of Russian oil with supplies from the United States and Venezuela.
Modi celebrated the tariff reduction in a post on X but made no mention of scaling back procurements of Russian oil.
Venezuelan crude is of a quality comparable to Russian oil—heavy, sour, and perfectly suited for producing downstream derivatives like fuel oil and diesel, for which Indian refineries are already configured, pointed out Rob Thummel, a senior portfolio manager at Tortoise Capital.
However, the timeline for this transition remains uncertain. Venezuela’s oil infrastructure is dilapidated, requiring roughly a decade of rehabilitation and tens of billions in investment dollars to restore it to the more than 3 million barrels per day it achieved before the socialist administration took power in 1999.
India also imports more crude from Russia than it does from Venezuela.
India is a significant purchaser of Russian oil, which has been subject to sanctions by most Western nations due to Russian President Vladimir Putin’s conflict in Ukraine. China procures substantially more Russian oil than India—and, unlike India, China has not faced additional tariffs related to its Russian oil purchases. Turkey holds a distant third position.
India’s Need for Russian Oil
Previously, Indian officials defended their acquisition of Russian oil, deeming it critical for the nation’s energy security. India stands as the world’s third-largest oil consumer, with Russia situated conveniently nearby. India relies on this imported oil to fuel its rapidly expanding economy, which is bolstered by having the world’s largest population.
Moreover, Russian crude trades at a substantial discount—approximately $16 per barrel—compared to OPEC or American benchmarks, making it difficult for India to exit that market, noted Robert Yaeger of Mizuho Securities. Even following this accord with the US, Yaeger suggested he anticipates India might skirt sanctions and continue buying Russian oil, as it has managed over the past few years.
“There have been a million different ways they have been able to navigate the sanctioning authorities,” Yaeger stated. “They will find a way to slip into the dark fleet and move those barrels.” (Dark fleets refer to vessels employing murky tactics to transport oil for rogue states.)
But as global oil prices have eased in recent months, the price differential between sanctioned and non-sanctioned crude has narrowed, potentially enabling India to facilitate a change.
Prices for US crude dropped 5% to about $61 per barrel on Monday, but this was largely unchanged from before Trump’s announcement. Oil had plummeted sharply earlier that day as traders hoped the US might secure an agreement with Iran without impacting the oil-rich nation.
This might signal that the oil market remains skeptical about the significance of the Indian deal.
“India has been slowly working on these trade negotiations for months, and the terms here are so vague that they could range from massive to nothing,” commented Scott Lincicum, an economist at the Cato Institute.
Tariff Easing
Trump specified that Indian goods would immediately face an 18% tariff, down from the 50% rate—a figure that included a 25% supplemental tariff imposed in August intended to pressure India into halting Russian oil purchases. A White House spokesperson informed CNN that Trump would fully eliminate the supplemental tariff and reduce the so-called reciprocal tariff.
Indian merchandise had been subjected to some of the highest tariff rates enacted by the Trump administration. Due to various exemptions, the effective tariff rate on Indian goods previously hovered around 35%, according to Subramanian.
Trump, referring to Modi as “one of my best friends,” also mentioned that the Indian Prime Minister had agreed to lower Indian tariffs on US products to zero and eliminate unspecified non-tariff barriers. While Trump did not detail which barriers would be removed, these commonly involve explicit taxes on services provided by American companies or value-added taxes on goods.
Perhaps Trump sought to secure this deal with India after the European Union finalized a long-awaited free trade agreement with India last week, suggested Subramanian.
“If India is granting preferential access to the EU, that will also hurt US businesses,” he stated. “A domino effect kicked in.”
While India is not among America’s largest trading partners, the tariff reduction could still carry real weight: the US imported $95.5 billion worth of goods from India in November 2025, representing 3% of their total import value, and exported $42 billion worth of goods there during the same period, according to US Census Bureau data.
Among the leading categories of goods the US imported from India last year are computers and other electronics like phones, pharmaceuticals, apparel, and chemicals. Prices for jewelry in the United States have risen in recent months partly due to the duties on India. Meanwhile, India’s main imports from the US included crude oil, gas, aircraft, and aircraft parts.
Beyond physical goods, corporate America is becoming increasingly reliant on India. Firms such as American Express, JPMorgan Chase, Microsoft, and Google have deepened their footprint in India, opting to hire local staff rather than sponsor visas for US work, and even establishing new regional offices there.
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