India Under Pressure: Falling Fuel Demand and Trump’s Harsh 50% Tariffs Raise Economic Risks

India’s economy is facing a dual shock. On one side, domestic fuel consumption is falling sharply. On the other, the United States under Donald Trump has just imposed painful 50% tariffs on Indian exports, adding pressure to an already challenged economic environment.

💥 Trump Responds to India’s Russian Oil Imports with Heavy Tariffs The Trump administration escalated trade tensions in response to India’s continued purchases of Russian oil, which Washington sees as undermining U.S. efforts to cut off Moscow’s war financing. These new tariffs are among the harshest measures Trump has imposed on any trading partner since returning to the White House. And while only about 20% of India’s exports go to the U.S., key sectors are directly in the crosshairs — including textiles, chemicals, apparel, gems, and jewelry. UBS estimates that roughly $8 billion worth of goods are now exposed to supply disruptions, representing about 2% of India’s GDP. Meanwhile, Trump has declared Russia an “extraordinary threat” to the United States.

⛽ Domestic Fuel Demand Declines Sharply, Diesel and Road Construction Hit Hardest The latest data from India’s Ministry of Petroleum show that total fuel consumption in July fell to 19.43 million metric tons, a 4.3% drop from June, and lower than the same time last year. 🔹 Diesel, India’s most consumed fuel, dropped 9% to 7.36 million tons

🔹 Gasoline fell slightly from June but rose 5.8% year-over-year to 3.49 million tons

🔹 LPG (used for cooking) rose 10.3% from June to 2.78 million tons, up 4.9% YoY

🔹 Naphtha, used in petrochemicals, declined 2% from June and 18% YoY

🔹 Bitumen, used for road building, saw the steepest fall — down 32% from June

🛢️ Russia Keeps Supplying Oil, with India and China as Major Buyers Despite U.S. pressure, India continues to import large quantities of Russian oil. According to data from Kpler, Russia has recently exported about 3.35 million barrels per day, with India taking 1.7 million and China 1.1 million. Russian oil is not fully sanctioned — instead, it is subject to a $60 price cap imposed by the G7 following the 2022 Ukraine invasion. The goal is to keep oil flowing while restricting Moscow’s revenues. This has allowed India to keep buying at discounted prices. Trump, however, is ramping up pressure. He has threatened an additional 10% tariff on all BRICS countries, accusing them of “joining anti-American policies” and called on them to distance themselves from Russia.

🌏 India and China Reconnect — Making Washington Nervous Another concern for Washington? The gradual warming of relations between India and China. Prime Minister Narendra Modi is set to attend the Shanghai Cooperation Organization summit in Beijing on August 31, marking his first visit to China in over seven years. He last met with Chinese President Xi Jlnping during last year’s BRICS summit in Russia. Since then, the two Asian powers have cautiously moved toward diplomatic thawing — after years of tension over border disputes in the Himalayas.

📉 Oil Prices React to Uncertainty Oil prices fluctuated during the day. They initially rose, but fell again after U.S. Secretary of State Marco Rubio told reporters that “more will be said later today” about potential new sanctions on Russia. Markets interpreted the comment as ambiguous. Meanwhile, the U.S. Energy Information Administration (EIA) confirmed that American crude oil stockpiles fell by 3 million barrels during the week ending August 1 — beating analyst expectations of 0.6 million, though still under the 4.2 million barrels reported by the American Petroleum Institute.

🔌 Europe Still Buys Russian LNG — A Double Standard? Although the EU has sharply reduced its Russian oil imports, it has not stopped buying Russian gas. In 2021, Russia was the largest oil supplier to the EU, accounting for 29% of total imports. That share has dropped to just 2% in 2025 after the EU banned seaborne crude from Russia. But Eurostat data from Q1 2025 show that 19% of Europe’s LNG imports still come from Russia. According to UBS analyst Giovanni Staunovo, sanctions only target certain LNG terminals like Arctic LNG 2, meaning not all Russian gas exports are blocked. This makes it harder for the U.S. to convince India to completely stop buying from Russia, especially when Europe hasn’t done so itself.

📊 Summary: India Balances Energy Needs, Trade Pressures, and Geopolitical Shifts 🔹 U.S. slaps 50% tariffs on Indian goods over Russian oil imports

🔹 Domestic fuel demand declines sharply, especially diesel and bitumen

🔹 India keeps buying Russian oil despite Western sanctions

🔹 Relations between India and China are slowly warming

🔹 Oil prices remain volatile amid new sanctions talk

🔹 Europe still imports Russian LNG — undermining U.S. messaging India finds itself in a geopolitical balancing act — trying to protect its economic growth, energy security, and diplomatic ties while facing mounting pressure from global superpowers. The key question: can New Delhi withstand Trump’s aggressive trade posture without derailing its own recovery?

#TRUMP , #Tariffs , #India , #economy , #Geopolitics

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