Trade Talks Gain Urgency
India's trade negotiators are racing against a widening policy risk in Washington, where a new sanctions-backed tariff law has created the possibility of punitive duties of up to 100% on countries that remain among the largest buyers of Russian energy, according to people familiar with the matter. India is understood to be on that list, placing the country's export outlook and broader economic planning under fresh pressure just as officials seek to finalize a bilateral trade deal with the United States.
The concern stems from the Graham Act, signed by President Donald Trump, which gives the US administration authority to impose steep tariffs on nations deemed to be helping finance Moscow's war economy through continued purchases of Russian oil and gas. While the law does not automatically trigger tariffs, it has sharpened uncertainty around the direction of US trade policy and raised the stakes for countries that have maintained energy ties with Russia since the Ukraine war began.
Sources said a trade agreement with Washington could potentially provide India a shield from the harshest measures, either by reducing the likelihood of enforcement or by creating a political and commercial framework that makes punitive action less likely. The exact contours of any such protection remain unclear, and officials on both sides have not publicly detailed whether a deal would explicitly exempt India from sanctions-linked tariffs.
Sanctions Risk Deepens
The immediate market concern is not only the size of the proposed tariff, but the precedent it could set. A 100% duty would be highly disruptive for Indian exporters, particularly in sectors with strong exposure to the US market such as engineering goods, textiles, pharmaceuticals, chemicals and select consumer products. Even the threat of such action could complicate pricing, contract negotiations and investment decisions for firms already navigating slowing global demand and volatile shipping costs.
For New Delhi, the issue is especially sensitive because India has defended its Russian oil imports as a matter of energy security and price stability. Since 2022, discounted Russian crude has helped cap import costs and support domestic inflation management. Any abrupt shift away from those purchases would carry fiscal and macroeconomic consequences, potentially lifting the oil import bill and complicating the Reserve Bank of India's inflation outlook.
The US move also comes at a delicate moment in the broader India-US relationship. The two countries have deepened strategic cooperation in recent years, but trade frictions have remained a recurring fault line. Washington has long pressed New Delhi on market access, tariffs and regulatory barriers, while India has sought greater predictability for its exporters and more room to manage energy sourcing on its own terms.
Deal As Buffer
Analysts said a trade deal could serve as a political buffer even if it does not formally override the sanctions law. A negotiated agreement may give the White House a reason to delay, narrow or calibrate enforcement, especially if the administration wants to preserve momentum in a key bilateral relationship. It could also open the door to side understandings on energy imports, tariff treatment or phased compliance expectations.
Still, the sources cautioned that the situation remains fluid. The Graham Act gives the US president broad discretion, and the final decision will likely depend on geopolitical calculations, domestic political pressures and the administration's broader approach to Russia. That means India cannot assume immunity simply because talks are advancing.
For now, the prospect of a deal has become central to India's risk assessment. Officials are weighing not just the direct tariff threat, but the possibility of secondary effects on supply chains, investor sentiment and export competitiveness. The uncertainty is likely to keep trade negotiators engaged at a high level in the coming days as both sides try to avoid a confrontation that could spill beyond commerce into the wider strategic relationship.