Uncertainty over India's trade exposure to Washington has intensified after US President Donald Trump signed the Graham Act, a sanctions law that authorises tariffs of up to 100% on countries deemed to be among the largest buyers of Russian oil and gas, according to sources familiar with the matter. India is understood to fall within the scope of the measure, placing one of the world's fastest-growing major economies in the crosshairs of a potential trade shock that could hit exporters, weaken sentiment and complicate already delicate negotiations with the United States.
Sources said a separate US-India trade agreement could provide a route to avoid the steepest tariff action, even if the sanctions framework remains on the books. The logic, they said, is that a bilateral deal could give Washington a political and economic off-ramp, allowing the administration to claim progress on trade and strategic alignment while delaying or softening punitive measures tied to Russian energy purchases. That possibility has become central to market expectations because the law, while broad in scope, still leaves room for executive discretion in how and when tariffs are imposed.
Tariff Threat Looms
The Graham Act has sharpened the stakes for New Delhi at a moment when India's external sector is already navigating slower global demand, uneven manufacturing momentum and persistent pressure on export margins. A 100% tariff would be far more severe than the targeted duties India has faced in past disputes and could, if applied broadly, disrupt shipments across sectors that depend heavily on the US market, including textiles, engineering goods, chemicals and select consumer products.
For Indian policymakers, the issue is not only commercial but strategic. India has defended its purchases of discounted Russian crude as essential to energy security and inflation management, arguing that its import decisions are guided by national interest rather than geopolitical alignment. But the new US law raises the cost of that position by linking energy trade with punitive access barriers to the American market, one of India's most important destinations for goods and services.
Deal Window Opens
People familiar with the discussions said the possibility of a trade deal has gained urgency because it could alter the political calculus in Washington. A signed agreement, even if limited in scope, may help the White House argue that the relationship is moving in a constructive direction and that punitive tariffs would undermine broader strategic and commercial gains. That does not eliminate the risk, sources cautioned, but it could reduce the likelihood of immediate or maximal enforcement.
The timing matters. The US has increasingly used trade policy as a tool of economic statecraft, and the Graham Act adds a sanctions overlay to an already unpredictable tariff environment. For India, that means the next phase of negotiations may determine whether the country faces a manageable policy dispute or a sweeping tariff escalation that could reverberate through supply chains and corporate planning.
India's Energy Dilemma
The core tension remains India's dependence on imported energy and its willingness to buy Russian barrels at a discount. Those purchases have helped contain domestic fuel costs and support macro stability, but they now sit at the centre of a transatlantic policy clash. Any move by India to sharply curb Russian imports would have implications for refinery economics, inflation and the trade balance. Any refusal to do so could invite harsher US action.
Analysts say the most likely near-term outcome is continued brinkmanship rather than an immediate tariff shock. The presence of a possible trade deal gives both sides room to negotiate, but it also means markets will remain sensitive to every signal from Washington and New Delhi. For Indian exporters, the message is clear: the tariff threat is no longer theoretical, but neither is a negotiated shield. The next steps in the bilateral talks may decide which of those outcomes prevails.