President Donald Trump's tariff policies have altered the framework governing international trade relations. Pressure tactics involving threatened tariffs of up to 100% are being applied to a number of trading partners, among them India, over their purchases of Russian oil.

Legislation targeting Russia and Iran, named after Senator Lindsey Graham, was enacted by President Trump and is set to come into force within 30 days. In addition to measures targeting Moscow, the United States Trade Representative is set to propose import duties on the five largest purchasers of Russian oil, a group that includes China.

The bill grants the administration broad discretionary authority and negotiating power as it pursues a trade agreement with India. New Delhi has communicated to American officials the possible consequences the proposed law could carry for trade ties between the two nations. New Delhi has stated it will pursue steps to defend both its commercial interests and its broader economic position, alongside efforts to secure its energy supply.

Prior to that, India had drawn scrutiny from the Trump administration over its purchases of Russian oil, with the country facing 25% duties alongside 25% reciprocal tariffs from the previous August. While maintaining that it holds the sovereign right to procure energy from any source globally, India nonetheless curtailed its purchases of Russian oil. New oil shipments bound for India dropped to 1.08 million barrels per day in February, roughly half the volume recorded the previous month.

The negotiations produced a provisional agreement framework under which tariffs on Indian goods would be reduced from 50% to 18%. The US Supreme Court subsequently struck down those provisions. A flat 10% tariff rate was put in place for 150 days, lapsing on 24 July.

The USTR initiated proceedings under Section 301 of the Trade Act of 1974 and applied a 10% tariff on Indian goods, citing the use of forced labour in their production inputs, as part of broader trade negotiation efforts. Proposed duties of up to 100% on Russian oil imports introduce considerable uncertainty into the tariff framework governing the two countries' bilateral trade agreement. A separate USTR probe into surplus production capacities is also underway.

India seeks preferential tariff treatment over rival exporters, though the duties it would face in the US market remain uncertain. On its side, the country has committed to lowering levies on American industrial and agricultural goods, while holding firm against imports of genetically modified maize, soya bean, and dairy products.

According to Ajay Srivastava of the Global Trade Research Initiative, the proposed oil tariffs could function as a pressure mechanism by Washington to push India away from Russian oil imports and toward accepting a trade arrangement that may favour one side. Unlike China, which has deployed export restrictions on rare earth minerals as a negotiating tool, India lacks comparable economic leverage to deter potential tariff measures from Trump.

Ongoing hostilities across the region have restricted access to alternative petroleum supplies. Prices are expected to be higher, with Brent crude averaging $109.8 per barrel during the current month.

Ongoing reliance on lower-cost Russian oil presents its own set of challenges. Reduced availability and narrowing price differentials have become the dominant market conditions as strikes on Russian energy facilities persist throughout the war with Ukraine. Figures from S&P Global show that Urals crude delivered to India has been fetching a premium on markets since 8 September.

Analysts have suggested that delaying the finalisation of a trade agreement may better serve the country's position, given that the future of existing tariff policies remains tied to upcoming mid-term election results.