US-India Trade War Intensifies: September 2025 Tariffs, Global Pressure, and Diplomatic Fallout

US-India Trade War Intensifies: September 2025 Tariffs, Global Pressure, and Diplomatic Fallout

In September 2025, the economic relationship between the United States and India plunged into turbulence as the US unveiled some of its steepest tariffs in recent history, directly targeting Indian exports and igniting sharp rhetoric on both sides. The backdrop: allegations of unfair trade practices, energy policy disputes, and a global push to limit Russian oil sales. This article unpacks the full context and consequences of this ongoing trade standoff.

US Slaps Steepest Tariffs on Indian Goods

The Trump administration, through Executive Order 14329 issued on August 6, imposed a sweeping 50% tariff on most Indian exports effective from August 27, 2025. This encompasses an extra 25% penalty specifically linked to India’s continued oil purchases from Russia on top of an earlier 25% “reciprocal” tariff, making it the highest levy the US currently imposes on any trade partner. Prior to this action, Indian exports typically faced duties of 0.5% to 10% in the US market. The new rules stipulate:

• Most Indian-origin goods: Base rate + 25% (now totaling up to 50%)

• Exemptions: Products shipped before August 27 and cleared before September 17; categories such as pharmaceuticals and some steel and auto products remain duty-free

US Commerce Secretary’s Sharp Rebuke

US Commerce Secretary Howard Lutnick fanned the flames further in press briefings and interviews, accusing India of protectionism and exploiting US market access while blocking American agricultural goods. Most notably, Lutnick pointedly remarked, “India brags about having 1.4 billion people but won't buy even a bushel of American corn... they put tariffs on everything. It’s not fair or reciprocal.” Lutnick insisted these extreme tariffs were meant to “right years of wrong” and warned that India must either open its market or face continued trade isolation. 

The Broader Global Campaign: Pressure on Russian Oil Buyers

The US is now urging partners in the G7 and EU to intensify the tariff campaign, pushing allies to consider 100% or “meaningful” tariffs on both India and China for sustained Russian oil imports. US officials argue that purchases from India and China fund Russia’s war in Ukraine; the call for coordinated action signals a widening of the pressure beyond bilateral trade, aiming at reshaping global oil and commodity flows. This campaign places India squarely at the crossroads of economic and strategic competition. 

India’s Response and Position

India has categorically rejected the US tariffs as “unfair, unjustified, and unreasonable,” defending its continued Russian oil imports as a matter of sovereign strategic autonomy and market necessity. Indian officials note that energy procurement is guided by national interest, not political dictates. Despite the rift, bilateral trade hit a record $132.2 billion in FY2025, although India’s trade surplus with the US (around $40.82 billion) remains a sore point in Washington.

On the negotiation front, talks are at a stalemate. India refuses to open up its agricultural sector to US products while the US insists on greater access for American farm exports. With both sides digging in, the current impasse is likely to persist unless a major policy shift or fresh diplomatic initiative emerges. 

Impact on Business and Future Prospects

The escalating tariffs are already having real-world impacts. Indian exporters face mounting losses and lost market share, especially in labor-intensive sectors. US importers are grappling with supply chain disruptions and rising input costs. Some exemptions exist for select goods, but overall air cargo volumes and trade flows are down sharply. Efforts are underway within the Indian government to soften the blow for local exporters and preserve US market access, but the outlook remains clouded.

Strategically, this standoff signals a critical moment for both nations. While defense, tech, and investment ties remain robust, the trade battle threatens to spill over into broader diplomatic and security cooperation, including within frameworks like the Quad. Bilateral trust is at risk, and mutual engagement is likely to be shaped by the outcome of this turbulent chapter.

For real estate, digital marketing, and international business professionals, these events underline the need to monitor global policy risks and diversify export strategies. As the US-India trade dynamic evolves, preparation and adaptability will be key for all stakeholders navigating this uncertain environment.