US tariffs and sanctions bill heighten India trade deal urgency, may raise import costs

The United States has imposed new tariffs on 60 countries, including India, elevating the urgency of a bilateral trade deal while threatening to increase India’s import costs. Under the measures, India received a 10% tariff structure, lower than the 12.5% applied to 41 other nations.

The tariffs, introduced following a US investigation into forced labour practices, initially raised India’s effective tariff rate from 1-2% to 11% by June 2025, with a further increase to 35-36% projected by August 2025. A February Supreme Court ruling later reduced the effective rate to around 12%. However, India’s textile and apparel industry did not secure tariff-rate quota exemptions, unlike competitors such as Bangladesh and Vietnam, potentially eroding its export competitiveness.

A separate US sanctions bill, passed by the Senate, now poses additional risks. The legislation threatens a 100% tariff on India’s $40 billion in Russian oil imports, which could disrupt crude supplies and push global oil prices beyond $100 per barrel. Analysts warn this may significantly raise India’s import bill, pressure the rupee, and widen the current account deficit. The outcome of ongoing US negotiations will shape India’s future energy import strategy.