Indian Stocks Suffer Trade Blowback as Delhi Issues Surprise Oil Response
Mumbai’s markets are selling down given the surprise tensions with Washington. But will this pressure last?
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At a time Asian equities are rallying virtually across the board, Indian stocks are the odd ones out, selling down as the country attracts the ire of U.S. President Donald Trump.
The sudden deterioration in relations between Trump and Indian Prime Minister Narendra Modi comes as a shock, given their prior close relationship, and has caught markets by surprise.
The Nifty 50 is down 0.3% Tuesday and 3.2% in the last month, with similar numbers for the Sensex, off 0.4% Tuesday and down 3.2% in the last 30 days.
That’s at odds with a rally of around 4% in the last month for stocks in Japan, Hong Kong, South Korea and Taiwan.
There are double-digit gains in most Southeast Asian markets in the last month, as I’ve noted in my most recent columns. Central banks in the ASEAN nations have moved into an easing cycle that’s propelling markets higher in a hurry.
So India is virtually alone in suffering a persistent selloff. It’s a dramatic change for a market that, in the post-Covid period, has often led global stock gains thanks to India’s outsized economic growth.
Tariff Rate of 25%
The White House has slapped Indian imports into the United States with a blanket 25% duty, frustrated that talks with India on reducing tariffs have seen little progress. That’s higher than any Asian nation that has secured any sort of trade pact with the Trump administration.
The markets in Japan and South Korea have moved higher after they inked deals to increase U.S. duties to 15%. Most Southeast Asian nations have secured rates of 19% or 20% … although as I’ve indicated some countries such as Vietnam and the Philippines say talks to exempt some goods or lower rates continue.
So in Asia, only tiny Laos (40%) and war-torn Myanmar (40%) currently face a higher rate than India on U.S. imports. You can find the full list of the latest White House threats here, and a handy tracker from The New York Times as to which country has secured a trade deal, and to what effect, here.
Malaysian stocks have also lagged this year. We’ll have to watch if they pick up now that Kuala Lumpur has agreed a pact to set U.S. import duties at 19%, while also agreeing to buy US$150 billion in tech goods over the next five years, spend US$19 billion on Boeing BA planes, and invest US$70 billion into the United States.
Malaysia to Rally Too?
Malaysian stocks are up a slim 1.7% since Thursday’s close, before the deal was announced. That still leaves the Kuala Lumpur index looking at a 6.3% loss in 2025, severe underperformance compared with the strong gains in Indonesia (up 9.5% in a month), Thailand (up 12.3%) and Vietnam (up 14.5%), so there’s room still to run.
Likewise, Indian stocks could rally significantly if a trade deal is secured. But for now, they are only narrowly in the green for 2025, and the tariff situation is worsening. That heaps added pressure on the Indian government and economy.
Trump’s scattergun approach to tariffs continues. A new refrain is that India continues to buy oil from Russia, thereby continuing the war in Ukraine.
Never mind that Trump initially looked to appease Russian President Vladimir Putin, and stated early in his presidency that Ukraine had somehow started a war that began with the Russian invasion of Ukraine.
Trump to Impose Punitive Tariffs
Now, it is apparently India’s fault that Trump has in no way secured the kind of Ukraine ceasefire that the U.S. president hopes will bring him the Nobel Peace Prize. Now it is India’s fault that war continues.
“India is not only buying massive amounts of Russian Oil, they are then, for much of the Oil purchased, selling it on the Open Market for big profits,” Trump wrote on social media this week. “They don’t care how many people in Ukraine are being killed by the Russian War Machine. because of this, I will be substantially raising the Tariff paid by India to the USA.”
Trump has not put a number on these punitive tariffs. But the Trump administration has set an August 8 deadline for Russia to secure a truce in Ukraine, beyond which the United States will “implement additional measures to secure peace,” U.S. diplomat John Kelley told the U.N. Security Council, without giving further specifics.
The Indian government issued a statement indicating that India began importing more oil from Russia because traditional supplies were diverted to Europe. Delhi insists that Washington “actively encouraged” those purchases, to improve global energy stability. And it’s true that Indian imports of Russian oil escalated dramatically in 2022, to US$25.5 billion that year from a relatively slim US$2.3 billion in 2021, then crossed US$50 billion last year.
“In this background, the targeting of India is unjustified and unreasonable,” the Indian government asserts in that statement. “Like any major economy, India will take all necessary measures to safeguard its national interests and economic security.”
Past U.S. Support on Oil
And indeed the U.S. ambassador to India at the time, Eric Garcetti, indicated that the purchases by India were designed to maintain Russian oil supply, avoiding a sudden price shock, but at a low price.
“They bought Russian oil because we wanted somebody to buy Russian oil at a price cap,” Garcetti said, as you can see in this clip. “It was actually the design of the policy, because as a commodity, we didn’t want oil prices going up.”
It is some surprise to see India come under Trump’s trade fire. Modi in February was one of the first world leaders to visit Trump during his second term in the White House. It appeared India would secure an early trade deal, as an important U.S. ally in Asia, offsetting both Russian and Chinese influence.
Another response to U.S. antagonism has been for Asian partners to seek more intraregional trade. Modi today welcomes Philippines President Ferdinand Marcos Jr. on an official visit, and China is deepening trade ties throughout South and Southeast Asia.
Modi so far has let official statements do the talking, and resisted outright criticism of Trump. I would not be surprised to see India ink a deal in the next week or two, prompting a rally in the underperforming Mumbai markets.
