Raghuram Rajan warns against US ‘gun to the head’ tactics as Trump’s 50% tariff threat strains India ties
Donald Trump’s 50% tariff threat on India—aimed at forcing New Delhi to ditch Russian oil—has jolted a relationship Washington once nurtured as a bulwark against China, putting billions in trade and years of goodwill at risk, while raising a crucial question: can India afford to halt Russian oil imports? Former RBI Governor Raghuram Rajan says it “wouldn’t be a disaster,” but warns of a “bigger issue” that could be politically explosive.
Rajan says: ‘Economic impact manageable, political fallout harder'
According to the top economist, “stopping purchases of Russian oil wouldn’t be a disaster for India, since current prices aren’t much higher than for Russian crude.”
While cutting off Russian oil entirely would push prices higher, India could still manage.
However, he stressed the political dimension: “An overt public decision to stop buying from Russia would be seen domestically as bowing to U.S. pressure, which plays badly in any democracy.”
He opined that a discreet request from Washington might have been acceptable, but “making it public, and tying it to a tariff threat makes it much harder politically.”
Trade talks strained by ‘gun to the head’ approach
Rajan said there are areas where trade liberalisation would benefit India and lowering tariffs could strengthen the economy. “But, it’s hard to negotiate with a gun to your head,” he added.
He expressed hope that tempers cool and discussions resume, warning that a 50% tariff is “unsustainable—not just for India, but also for the U.S., which risks alienating a country it hopes will be a strategic partner. People remember these things for a long time, and turning them away is rarely smart geopolitics.”
Tensions deepen after sharp remarks
While a deal to avoid the tariff hike is still possible, Trump’s combative rhetoric has quickly eroded goodwill built over years. He has labelled India’s economy “dead,” its tariff barriers “obnoxious,” and its people indifferent to Ukraine’s plight, adding to tensions after earlier angering India by claiming to have brokered peace with Pakistan.
India hits back, cites energy security
The Indian government has defended its Russian oil purchases as essential for energy security and criticised Trump for singling out India when other countries also buy Russian crude.
“We reiterate that these actions are unfair, unjustified and unreasonable,” the Ministry of External Affairs said in a statement. “India will take all actions necessary to protect its national interests.”
Economic stakes and strategic risks
Bloomberg Economics estimates a 50% tariff could slash US-bound exports by 60%, cutting 0.9% from India’s GDP. The blow would fall hardest on labour-intensive sectors such as gems and jewellery, textiles, footwear, carpets, and agricultural goods.
Analysts warn that continued pressure could push India closer to Russia and China.
Prime Minister Narendra Modi is set to visit China later this month—his first trip there in over seven years.
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