Trump Threatens Tariff Escalation on India, All But Ending Hopes for Trade Deal Before 2027

HEADLINE: Trump Threatens Tariff Escalation on India, All But Ending Hopes for Trade Deal Before 2027

WASHINGTON — President Donald Trump signaled Friday that the United States is prepared to further increase tariffs on Indian goods, issuing a stark ultimatum regarding New Delhi’s policy on Russian oil imports. This escalation marks a severe deterioration in bilateral economic relations, suggesting that the political window for ratifying a U.S.-India free trade agreement (FTA) before the 2027 deadline has effectively closed.

"We could raise tariffs on India if they don't help on the Russian oil issue," President Trump warned, responding to intelligence that Indian refineries have resumed significant purchases of sanctioned Russian crude.

For prediction markets monitoring the probability of a trade deal enactment by December 31, 2026, the development is decisive. Rather than moving toward the tariff reductions and regulatory alignment required for an FTA, the administration is pivoting toward a deeper trade war.

The "Refining Loop" Dispute The threat of escalation follows a punitive tariff package of roughly 50% already imposed on Indian goods in August 2025. Despite those levies, data released this week indicates that India’s Russian oil imports have rebounded to a six-month high, accounting for over 35% of the country's total oil intake.

At the heart of the dispute is the "refining loop." Indian refiners, utilizing "shadow fleet" tankers to bypass Western restrictions, are processing discounted Russian crude and exporting the resulting petroleum products to global markets. Washington argues this undermines the Western sanctions regime against Moscow; India maintains that energy security dictates its procurement policy.

Market Impact The diplomatic standoff has created a hostile environment for trade negotiations. With existing tariffs already straining sectors such as textiles and pharmaceuticals, the President’s threat to "raise tariffs" implies a move beyond current rates, potentially reaching 100% on specific sectors or triggering secondary sanctions.

Given this entrenched position, the consensus among trade observers is that the political capital required to negotiate, sign, and ratify a comprehensive trade agreement through the U.S. Senate is currently nonexistent.