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From Partnership to Penalty: US Tariffs Shadow India Trade Deal

The promise of deeper economic cooperation is undermined by punitive measures that could torpedo the India-U.S. pact even before it is signed.

Indian Prime Minister Narendra Modi with U.S. President Donald Trump in happier times at the White House, June 26, 2017.

U.S. Ambassador to India Sergio Gor recently claimed that the India-U.S. trade agreement is on the verge of finalization and that “almost everything” about the agreement was done “in principle.” 

However, even as Gor was exuding confidence regarding the deal, two initiatives taken in Washington in just over a month have brought yet another round of the tariff war to India’s doorstep. These initiatives have the potential of increasing friction between the two countries, and could even torpedo the deal. 

The most egregious of these developments is the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, a bipartisan bill proposed in the U.S. Senate, which has the backing of the U.S. President Donald Trump. 

The second development is Trump’s proposal to impose 100 percent tariffs on generic medicines from 2028, unless the firms exporting these medicines do not reshore their operations to the U.S. This proposal could significantly affect India’s pharmaceutical industry since the U.S. is its largest export market.

The bipartisan Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, named after the late Republican senator, who was the bill’s strongest proponent, was overwhelmingly voted by the Senate (86-11) in early August. The House of Representatives will take up the bill for consideration after it reconvenes in early September, and could push for its early adoption.

The primary objective of the bill is to tighten the economic sanctions on Russia for its continued war on Ukraine. The bill proposes 500 percent tariffs on all goods imported into the U.S. from Russia. It also proposes 100 percent tariffs on all goods imported into the U.S. from the five largest importers of crude oil or natural gas, by total volume, originating in the Russian Federation. As one of the largest importers of Russian-origin crude oil, India also faces penal tariffs for facilitating Russia’s sanctions evasion.

Market analysts put India as the second-largest buyer of Russian crude oil in July 2026, valued at over $7.3 billion, or about 37 percent of Russia’s global exports.  

According to Indian government data, India’s dependence on Russian crude oil increased from 30 percent to nearly 43 percent of its total imports between January and June 2026. In February 2026, after the U.S. and India reached a framework for an interim agreement as a step toward finalizing the trade deal, Trump announced that the 25 percent tariffs imposed on India in August 2025 for importing Russian crude oil was withdrawn. 

India, according to Trump, had........

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