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Why Did India Become the “Scapegoat” After Trump Raised Tariffs?

Plastmatch Insights Lab 2025-08-06 15:03:27

Recently, the Trump administration announced a significant increase in import tariffs on Indian products, citing India's large purchases of Russian oil and "profiting" from it. This move has made India the focus of public opinion. Some in the market believe that if Trump cannot make India yield, the deterrent effect of the tariff policy may be greatly undermined. In fact, India has become the "scapegoat" in this trade game, which is the result of multiple intertwined factors.

Trump’s intense focus on the trade deficit was the direct trigger. In 2024, the US-India goods trade volume was about $128.8 billion, with India enjoying a surplus of $45.8 billion—something Trump has always brooded over. He repeatedly accused India of having excessively high tariffs and heavy non-tariff barriers, demanded that India open its agricultural and dairy markets, and called for increased imports of American oil to reduce the deficit. However, India’s realities make concessions difficult: agriculture remains a vital pillar of its economy, with countless small farmers depending on the land for survival. If foreign agricultural products were allowed to flood in, domestic agriculture and farmers would face devastating blows. Especially since Modi’s government only barely secured a majority in the 2024 general election with the support of its coalition partners, it is even less willing to make compromises on issues affecting farmers’ interests.

Figure: Trend of India's Trade Surplus with the United States

India's continued purchase of Russian oil has become another excuse for pressure from Trump. Since the Russia-Ukraine conflict, India's imports of crude oil from Russia have increased significantly, at their peak accounting for nearly 40% of its total oil imports. For India, this is an economically rational choice—Russian crude oil is offered at discounted prices, and long-term supply contracts have been signed to ensure energy security and supply stability. Indian officials have also bluntly stated that the United States once encouraged them to trade with Russia to stabilize the global energy market, but now singles them out, which seems "unfair and unreasonable." They further point out that the trade volume between the EU and Russia far exceeds that of India, yet the EU has not faced similar treatment; this selective pressure is even harder for India to accept.

Chart: Since the Russia-Ukraine conflict, Russian oil has become India's largest import source.

The deadlock in U.S.-India trade negotiations has further exacerbated tensions. After five rounds of talks, the two sides have failed to reach even a small-scale trade agreement. The United States insists that India expand market access, while India remains steadfast in protecting its domestic industries. The U.S. is India’s largest export market, accounting for nearly 20% of its total exports. However, the Trump administration not only raised tariffs on Indian goods to 25%—higher than those imposed on emerging economies such as Vietnam and Indonesia—but also repeatedly belittled the Indian economy in an attempt to pressure India into making concessions. This tough stance has left India in a dilemma: on the one hand, higher tariffs may lead to a 0.2% decrease in economic growth and hit exports; on the other hand, making concessions would harm core domestic interests.

Faced with pressure, India stated that it "will take all necessary measures to safeguard national interests." Modi also called on the public to buy domestic products to cope with global uncertainties, but countermeasures remain limited. Ultimately, India becoming a "scapegoat" is both a product of Trump's unilateral trade policies and a reflection of the irreconcilable differences in interests between the US and India.

Author: Zhou Yongle, Senior Market Analyst at Specialized Vision

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Why Did India Become the “Scapegoat” After Trump Raised Tariffs?

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