Tariffs, Tensions, Trade Deal That Fell Apart: What’s Going On Between the U.S., India

Just when it seemed like Washington and New Delhi were on track to deepen their ties, a new twist has brought their relationship to one of its lowest points in recent years.

This week, the United States hit India with a massive 50 percent tariff on oil imports — the highest imposed on any country so far. The decision, announced Wednesday, adds an extra 25 percent on top of existing duties, catching many analysts and diplomats off guard. While Brazil is the only other country facing similarly steep penalties, the move marks a major shift in how the U.S. is handling even its closest partners.

The tariff hike follows weeks of growing friction between the two countries. Just last week, U.S. President Donald Trump publicly criticized India for its purchases of oil and military equipment from countries outside the Western orbit, calling India’s economy “dead” alongside others — a remark that raised more than a few eyebrows in Delhi.

Trade talks between the two sides had been going on for months. India had offered to remove tariffs on U.S. industrial goods and scale back taxes on cars. It even signaled willingness to boost defense and energy purchases from American suppliers.

But when it came to agriculture — especially dairy and farm goods — India drew a red line. With hundreds of millions of rural jobs on the line, Indian negotiators refused to open the sector to more U.S. imports, a position shared by other nations in similar talks.

Vina Nadjibulla, vice president of strategy and research at the Asia Pacific Foundation of Canada, called the tariff fallout “a surprise” and said the breakdown was one of the most difficult moments in recent U.S.-India relations in years.

“They now need a pragmatic path forward and a way to rebuild trust,” she said.

New Delhi, for its part, has officially called the new tariffs “unfair, unjustified, and unreasonable.” Indian officials say their purchases of oil are based purely on domestic energy needs, not on political considerations — and that securing affordable energy for a population of 1.4 billion is non-negotiable.

There are other layers to the situation too. Differences over regional security — including a recent flare-up between India and Pakistan — have added more tension. Trump has claimed he personally mediated a ceasefire during that conflict, something India flatly denies. Pakistan, on the other hand, credited Trump and even floated his name for a peace prize nomination. Meanwhile, Islamabad has walked away with new deals to explore critical minerals and energy reserves with the U.S., further complicating the triangle.

Farwa Aamer, director of South Asia Initiatives at the Asia Society Policy Institute, says this is more than just a trade spat. “This will test India’s foreign policy,” she said. “The question is whether India can maintain a balanced approach — continuing its partnership with the U.S. while preserving its longstanding ties with others.”

With the 50 percent tariffs set to take effect in three weeks, India now finds itself at a crossroads. The promise of a $500 billion trade relationship, once touted by Prime Minister Narendra Modi, now seems a distant goal. The road ahead will likely depend on whether both sides can step back from confrontation and focus on long-term cooperation — something both countries have publicly claimed to want.

For now, though, things are tense. And neither side seems ready to blink.