Trump Administration Imposes Secondary Tariffs on India

On August 6, President Trump issued an Executive Order (“EO”) (“Addressing Threats to the United States by the Government of the Russian Federation”) invoking his authority under the International Emergency Economic Powers Act (“IEEPA”) to impose a tariff of 25% on most products imported from India, effective August 27, in response to India’s importation of Russian-origin oil.

The EO also establishes a process for the possible imposition of similar tariffs on other countries that are identified by the U.S. government as directly or indirectly importing Russian oil. The EO follows threats President Trump made in late July to penalize India for such purchases, after negotiations on a possible U.S.-India trade deal reached an impasse. Key elements of the EO are summarized below.

This marks the first time President Trump has imposed a so-called “secondary tariff”—that is, a tariff imposed against one country (in this case India) for doing business with a second country (Russia). Separately, earlier this year, on March 24, EO 14245 authorized secondary tariffs of 25% on countries determined to import Venezuelan oil, though no countries have been designated under that order, so no secondary tariffs based on purchases of Venezuelan oil have been imposed.

The concept of secondary tariffs is similar to that of “secondary sanctions,” which are used by the U.S. government to penalize non-U.S. companies and individuals for engaging in activities with sanctioned countries or parties that the United States wishes to discourage, and which U.S. companies and individuals typically are prohibited from undertaking.

The August 6 EO follows statements by President Trump that he would consider secondary tariffs against importers of Russian oil if Russia did not agree to a ceasefire in Ukraine by August 8. The EO asserts that a secondary tariff on India is necessary to respond to Russia’s actions in Ukraine, which threaten U.S. national security and foreign policy. Specifically, the August 6 EO cites to the emergency previously described in EO 14066 of March 2022, which prohibited the importation into the United States of Russian oil and petroleum, among other products.

Cumulative 50% U.S. Tariff on Most Indian Goods

Subject to certain limited exceptions described below, the new 25% tariff will apply in addition to other applicable duties and fees on imports from India. This includes the reciprocal tariff of 25% announced against India on July 31 in EO 14326, which took effect on August 7 and also was imposed under IEEPA. As a result, most U.S. imports from India became subject to a 25% reciprocal tariff as of August 7, and will be subject to a cumulative 50% IEEPA-based tariff beginning August 27.

Tariff Exemptions

The 25% tariff imposed under the August 6 EO will not apply to imports from India in the following situations:

• An “on the water” exception exempts goods loaded onto a vessel at the port of loading and in transit on the final mode of transit prior to August 27, and also entered for consumption into the United States prior to September 17.
• The EO’s secondary tariff will not apply to products that are exempt from reciprocal tariffs, which are listed in Annex II of EO 14257. Several of these products are already—or soon will be—subject to national security tariffs under Section 232 of the Trade Expansion Act of 1962 (“Section 232”). Indeed, the EO explicitly exempts products subject to existing or future Section 232 actions.

The EO indicates that secondary tariffs may be imposed on additional countries determined to be directly or indirectly importing Russian oil. “Russian oil” is defined as “crude oil or petroleum products extracted, refined, or exported from the Russian Federation, regardless of the nationality of the entity involved in the production or sale of such crude oil or petroleum products.” Indirect purchases of Russian oil that can “reasonably be traced to Russia,” even if purchased from an intermediary or third country, are also within the scope of the potential secondary tariffs.

The EO directs the Secretaries of Commerce, Treasury, and State, in coordination with other U.S. government agencies and officials, to determine whether any other country is directly or indirectly importing Russian oil, and to recommend whether the President should take similar actions in response, including the imposition of 25% tariffs. The President may also modify the tariffs as needed to address the underlying national emergency relating to Russia, including modifications in response to foreign government retaliation against the United States.

Since late 2022, the policy of the United States and its allies with respect to Russian oil exports has been defined by the “G7 Russia Oil Price Cap.” Under this policy, Russia has been permitted to continue exporting oil, but sanctions measures have been applied by the G7 countries to suppress the price at which that oil is sold.

The European Union recently doubled down on this policy, declaring that it would seek to enforce a price cap of $47.60 per barrel, in lieu of the previously established cap of $60 per barrel. The Trump Administration did not join the European Union in lowering the price cap.

India has objected to the newly-imposed secondary tariff on grounds that it is being punished for doing precisely what the G7 Russia Oil Price Cap policy invited it to do—import attractively-priced Russian oil. Therein lies the true policy significance of the imposition of the secondary tariff on India:  President Trump has effectively withdrawn U.S. support for the G7 Russia Oil Price Cap policy, and instead is now pursuing a policy more akin to the “maximum pressure” policies that the United States has pursued with respect to other sanctioned oil-exporting countries, such as Iran and Venezuela. Under a maximum pressure policy, the goal is not to suppress the price at which the targeted country is able to export its oil, but rather to try to reduce that country’s oil exports to zero.