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India Turns to U.S. Energy to Shield Itself From Massive Tariffs
India has agreed to deepen its energy trade with the United States in a bid to avoid the introduction of higher tariffs on exports by President Donald Trump. In recent months, Trump has threatened several countries with tariffs if they do not import larger quantities of U.S. gas, to varying success. India, like several other Asian countries, has decided that agreeing to increase imports is the best way to help avoid its economy being hit hard by restrictions on trade with the U.S.
This week, India’s Petroleum and Natural Gas Minister, Hardeep Singh Puri, announced that a deal had been made for the U.S. to supply almost 10 percent of India’s liquefied petroleum gas (LPG) imports. The agreement was made to decrease the trade surplus between India and the U.S. The two powers have agreed to a one-year deal to import roughly 2.2 million tonnes a year of LPG from the U.S. Gulf Coast. The LPG purchase price will be based on the Mount Belvieu benchmark.
On the X social media site, Puri said, “A historic first! One of the largest and the world’s fastest-growing LPG market opens up to the United States. In our endeavour to provide secure affordable supplies of LPG to the people of India, we have been diversifying our LPG sourcing.” This marks the “first structured contract of U.S. LPG for the Indian market”, according to Puri.
India’s LPG demand has increased by 74 percent over the last decade, supported by both higher incomes and Prime Minister Modi’s Ujjwala program, which provides subsidised cooking gas to low-income households.
India sources most of its LPG from the Middle East at present, primarily from Qatar (27 percent), the UAE (26 percent), and Saudi Arabia (19 percent). The deal suggests that the Southeast Asian country may now be looking to diversify its energy sources following disruptions in the Red Sea, as well as OPEC+ cuts. At present, India imports between 20 to 21 million tonnes of LPG a year. If the U.S. provides 10 percent of its LPG supply, this could equate to around $1 billion in imports. Meanwhile, India’s trade surplus with the U.S. stands at around $40 billion.
In August, the Trump administration announced it would be imposing a 50 percent tariff on Indian goods to address trade imbalances and encourage India to halt the import of Russian oil. While the tariffs have negatively affected the U.S.-Indian partnership, India has yet to reduce its imports of Russian crude. India continues to benefit from the discounted prices that Moscow is offering to counter the ongoing international sanctions on Russian energy products. In 2024, India bought $52.7 billion of Russian crude, contributing around 37 percent of its oil bill.
Meanwhile, last week, Trump threatened to introduce tariffs of up to 500 percent on countries that continue to buy Russian energy. “The Republicans are putting in legislation that is very tough, sanctioning, etcetera, on any country doing business with Russia,” Trump told reporters. As well as India, the tariffs could hit China hard as it continues to purchase significant quantities of Russian oil.
Following the agreement to purchase more U.S. LPG, Trump said he plans to remove the 25 percent tariffs imposed on India for importing Russian oil in November, while the 25 percent reciprocal tariffs will remain in place through 2026. The LPG deal is part of a larger bilateral trade agreement between the two countries. Trump recently stated that the two powers were “pretty close” to a “fair trade deal”.
In October, following the agreement, India’s exports to the U.S. increased for the first time in five months, rising by 14.5 percent from September. Chevron, Phillips 66, and TotalEnergies are expected to transport the LPG to India in 48 tankers starting in January. The state-run oil majors, the Indian Oil Corporation (IOCL), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL), will manage the supplies once on Indian soil.
In the long term, India hopes to diversify its energy sources in a bid to decarbonise and boost its energy security. At present, India is the third-largest carbon dioxide emitter worldwide, after China and the U.S.
India’s energy demand is set to double from current levels by 2045 as the economy continues to grow, yet the government has introduced a net-zero carbon emissions target for 2070. To achieve this, India will have to diversify its energy sources and significantly increase its renewable energy capacity, as outlined in the national roadmap for energy transition.
India’s new energy agreement will see it import more LPG from the United States over the next year, with the possibility of extension. The move is expected to encourage President Trump to reduce U.S. tariffs on Indian goods to help restore trade relations. However, this may depend on whether India is willing to cut energy trade ties with Russia.
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