Fueling Friendship: India May Boost US Oil Buys
As trade tensions under President Donald Trump’s second term continue to simmer, India could use a diplomatic and economic lever to ease growing pressure—by boosting oil imports from the United States, according to Alchemy Capital Management’s director and chief investment officer, Hiren Ved.
A Strategic Approach to Shrinking the Trade Gap
According to Ved, the U.S. is likely to focus more sharply on addressing trade imbalances, and India’s sizable $36 billion trade surplus could put it under Washington’s scrutiny. Instead of reacting defensively, Ved suggests that strategic cooperation—especially through oil imports—could offer a mutually beneficial path forward.
“There are two major options India can explore,” Ved explained. “One is long-term—defence equipment purchases. The other is more immediate and impactful—increasing crude oil imports from the US.”
How Oil Can Help Balance the Scales
Ved notes that Russia supplied 38% of the nearly 232 million tonnes of crude oil that India purchased in 2024. This dramatic rise in Russian oil purchases follows the Ukraine war sanctions, which enabled India to buy Russian crude at discounted prices. This change considerably decreased the US’s proportion of India’s oil imports, although being financially wise.
In 2022, the US accounted for 9% of our oil imports. Now, it’s only 3–4%,” Ved stated. “Assuming a price of $70 per barrel, restoring the US share to 9% could result in an additional $7.6 billion in imports.”
Such a move, he explained, could trim nearly a quarter of the trade surplus—a meaningful gesture as Washington eyes reciprocal trade policies more aggressively.
India’s Diplomatic Maturity in Trade Relations
Ved commended India’s measured and diplomatic handling of trade negotiations, especially compared to other nations that responded with tariff retaliation during Trump’s earlier protectionist moves.
“India didn’t retaliate. We didn’t impose counter-tariffs or launch into criticism,” he said. “Instead, we stayed focused on engagement—that’s mature diplomacy.”
He pointed out that while other nations took a confrontational route, India remained committed to resolving trade issues quietly, behind closed doors. This strategy has positioned India as a cooperative and solution-oriented player in global trade talks.
Tariff Reductions as a Sign of Goodwill
Over the past year, India has already moved to lower import duties on several high-value American goods. These include:
• Luxury motorcycles, which now have 30% instead of 50% charges
• A reduction from 150% to 100% in Bourbon whiskey
• Taxes on telecom equipment have decreased from 20% to 10%.
“These reductions are not random; they’re clearly part of India’s plan to ease trade tensions and signal intent for a broader trade agreement,” Ved noted.
Positive Signs Amid Trump’s Tariff Pause
On April 9, President Trump announced a 90-day freeze on planned reciprocal tariffs for most countries—excluding China. While this does not eliminate all duties, it does offer temporary relief.
For India, the key takeaway is that a proposed 26% reciprocal tariff will not apply for now, offering room for further negotiation. However, the 10% baseline tariff—which came into effect globally from April 5—remains in place.
Still, Ved views this pause as a positive signal, reinforcing the importance of India’s continued, quiet diplomacy. He also hinted that a formal trade deal between the two countries could be finalized as early as June, based on ongoing discussions.
India’s Growing Oil Flexibility
Importantly, Ved emphasized that India has ample room to shift its oil sourcing strategy. With the country importing from a diverse range of suppliers—including Russia, the Middle East, and Africa—buying more from the US wouldn’t significantly disrupt existing relationships.
“Oil is a flexible trade lever,” he said. “It gives us a way to send a strong diplomatic signal without causing internal disruptions. That’s powerful.”
Final Thoughts: Economic Diplomacy Over Confrontation
India’s trade relations with the US are at a delicate but promising stage. Instead of resorting to retaliation or nationalist rhetoric, India has opted for a strategy rooted in diplomacy, flexibility, and mutual benefit.
Ved believes that increasing US oil imports is a smart, low-conflict way to manage trade pressures, especially under the Trump administration’s tougher stance. Combined with India’s proactive tariff adjustments and its steady approach to negotiations, this strategy may well help avoid a full-blown trade conflict while keeping the path open for a comprehensive bilateral agreement.
The image added is for representation purposes only
