Why Trump’s Russia sanctions Bill could effectively end India’s exports to US

Lindsey Graham and Donald Trump

The successful passage of the bill could affect India’s interests the most, as it is yet to sign a trade deal with the US. New Delhi, therefore, will have no reprieve from the continued US action that is increasingly disrupting trade globally. India already faces steep 50 per cent US tariffs that threaten its exports of labour-intensive sectors such as textiles, footwear and marine products.

Removes scope for legal challenge

Graham’s social media post stating that Trump has given a go-ahead to the Russia Sanctions Bill comes amid risk for the Trump administration of losing the IEEPA court case. Three lower courts — the US District Court for the Northern District of Illinois, the US Court of International Trade (CIT) and the US Court of Appeals for the Federal Circuit — have already ruled against the Trump administration on the IEEPA issue. Top officials have already defended the use of IEEPA on multiple occasions to sway the court’s decision.

However, the new legislation bypasses the legal risk of using IEEPA and offers Trump a stronger legal tool to give up Russian oil, in a bid to end the Russia-Ukraine war and continue with its tariff policy. The US has already begun a range of Section 232 investigations, authorising Trump to impose 50 per cent tariffs on steel, aluminium, and copper using Section 232.

Effectively shuts Indian exports to the US

A passage of the bill states that “the President must increase the rate of duty on all goods and services imported into the United States from countries that knowingly engage in the exchange of Russian-origin uranium and petroleum products to at least 500 per cent.” Given the significant damage inflicted on India’s exports, currently valued at over $85 billion, trade experts say that a 500 per cent tariff would effectively end India’s annual goods exports to the United States.

The scope of the Russia Sanctions Bill is unclear and could cover products currently excluded from the reciprocal tariffs. Several items, such as electronics, pharma, coffee, and tea, have been excluded thus far. Thus, India has continued to export one of its fastest-growing export items – mobile phones.

China’s exports are well diversified

While additional tariffs on countries buying Russian oil dramatically raise tension in global trade dynamics, it could end up hurting India the most, as its exports are not as diversified as China’s to partially circumvent the impact of the US tariffs. Despite US tariffs on China, Beijing managed to record a $1 trillion trade surplus with the rest of the world in 2025 due to its domination in sunrise sectors and its stronghold on critical minerals.

While India has fast-paced reforms to push for manufacturing and attracting investments, India exporters have said that the Indian products are being replaced by foreign products as they are not technology-intensive in nature. On the contrary, the largest buyer of Russian oil – China- has multiple leverage to fight back against US tariff coercion as it has done in the past.

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Weakens India’s negotiation position with partners

The successful passage of the Russia sanction bill will significantly weaken India’s negotiating position, as New Delhi will come under pressure to diversify goods exports away from the US. India is negotiating a trade deal with the European Union. New Delhi is negotiating a trade deal with the Association of Southeast Asian Nations (ASEAN) nations, Chile, Peru, Australia, Bahrain, the Gulf Cooperation Council (GCC), the Eurasian Economic Union (EAEU), Canada and the Southern African Customs Union (SACU).

A weaker negotiating position typically results in steeper asks by partner countries. India has maintained its red lines on agriculture and dairy products even with countries which do not sign trade deals without access to these sectors. Australia and New Zealand, however, were not given deep access in these sectors during the trade deal negotiations.

Three lower courts have already ruled against the Donald Trump administration on the IEEPA issue (FB@DonaldTrump).

Raises investment uncertainty further

More than goods exports, US tariffs have impacted investments in India. Several investors are also sitting on the fence due to the ongoing rift between India and the US over the trade deal. A steep 500 per cent tariff on India for purchasing Russian oil could end up hurting investments even further. A 2025 Bank of America (BoFA) research note said that the primary challenge India is facing due to US tariffs has been on capital flows.

“Capital flows are an issue which remains multifaceted and has been seen across FDI flows, FPI flows, and debt-related inflows, which have, to a certain extent, stalled. Indeed, the RBI, as per official data, has sold $65bn in the open market between October 24 and September 25, and is also running a large short forward book position of $63.6bn until the end of October, which has probably increased in November given the extent of pressure on the rupee,” the report said.

The report said that the recent bout of weakness in the rupee, which has weakened almost 7 per cent in the last year, and has meaningfully underperformed against other currencies, has resulted in a larger real effective exchange rate depreciation of over 9 per cent. This weakness, which may persist in the near term given the latent uncertainty of the US-India trade deal and pressure on capital flows, can and will impact various macroeconomic variables in India, if it persists, the report said.