Tariffs, Trump, and the Truth India Won't Say Aloud: By Raghuram Rajan's Revelation

What began as a provocative disclosure by former RBI Governor Raghuram Rajan has now grown into a revealing window into the fragile, personality-driven undercurrents shaping global diplomacy today. Rajan’s assertion that the 50 per cent US tariff on Indian goods was triggered not by Russian oil imports but by India’s refusal to publicly endorse Donald Trump’s claim of brokering the India–Pakistan ceasefire strikes at the heart of how power, ego, and silence now intersect in international relations. This is not merely about trade or oil; it is about narrative control, political posturing, and the dangerous cost of ambiguity in an era where truth itself is contested terrain.

For months, Washington had framed its harsh tariff escalation on Indian goods as punitive action against India’s continued oil trade with Russia. The data did appear to support this narrative at first glance. India’s imports of Russian crude surged from under 2 per cent before the Ukraine war to nearly 35 per cent by mid-2024, making Russia India’s single largest oil supplier. The US, meanwhile, doubled tariffs to 50 per cent in August, explicitly citing this energy relationship. Yet Rajan’s remarks from Zurich puncture this official version with a far more uncomfortable explanation: that the real trigger lay in India’s refusal to amplify Trump’s self-proclaimed role as a peacemaker between New Delhi and Islamabad.

If this claim is even partially true, it reveals something profoundly troubling about the current architecture of global decision-making—that sovereign economic punishment is no longer rooted solely in policy disagreements but increasingly in wounded political vanity. Trump’s repeated claim, made nearly 70 times since May, that he single-handedly stopped a war between India and Pakistan is not supported by India’s official account. The ceasefire announced on May 10 followed Operation Sindoor, a direct Indian military retaliation for the April 22 Pahalgam terror attack that killed 26 civilians. New Delhi has consistently maintained that de-escalation came through direct military-to-military communication after Pakistan’s DGMO contacted his Indian counterpart. There was no third-party mediation, at least not in the version India has publicly upheld.

And yet, here lies the strategic contradiction: despite rejecting Trump’s version through official briefings, Prime Minister Narendra Modi has never personally contradicted Trump’s claim—not once. This studied silence has created a diplomatic vacuum where conflicting narratives now coexist, each carrying geopolitical consequences. Pakistan, in sharp contrast, played what Rajan called a “smarter game” by openly crediting Trump, eventually nominating him for the 2026 Nobel Peace Prize. The result, if Rajan’s formulation is to be believed, was a stark asymmetry: India slapped with 50 per cent tariffs, Pakistan with 19 per cent.

Trade data already shows the damage. Indian exports to the US in key sectors such as engineering goods, textiles, pharmaceuticals, and IT hardware have faced measurable pressure since August. Engineering exports alone declined by nearly 7 per cent in the subsequent quarter, while MSME-driven textile exports to the US saw order cancellations and price renegotiations as buyers sought tariff-adjusted alternatives from Vietnam and Bangladesh. The estimated annualised loss to Indian exporters from the tariff hike is being placed by trade bodies between $7–10 billion. These are not abstract numbers; they represent factories slowing down, credit stress rising, and employment uncertainty in already fragile industrial clusters.

What makes the situation analytically darker is the convergence of three destabilising forces: trade weaponisation, personality politics, and narrative insecurity. Trump’s October claim that Modi had pledged to stop buying Russian oil—flatly denied by India—was followed by his blunt warning: deny it, and “they’ll just continue to pay massive tariffs.” This is not diplomacy as traditionally understood; this is leverage through public coercion. Rajan’s suggestion that Switzerland’s leadership may also have unsuccessfully tried to reason with Trump only reinforces the idea that institutional buffers are weakening in the face of executive impulse.

India’s predicament is uniquely delicate. On one hand, its Russian oil purchases are grounded in hard economic logic. Discounted crude saved India an estimated $35–40 billion in its import bill over two years, cushioning inflation and stabilising fiscal balances. On the other hand, the US remains India’s largest export market and a critical strategic partner in technology, defence, and Indo-Pacific security. Balancing these interests requires not just economic dexterity but narrative clarity. And this is precisely where the current dissonance becomes dangerous.

Rajan’s remarks have ignited debate not because they attack the government, but because they expose how opaque high-level power exchanges may actually be. If tariffs of such magnitude can be driven by personal grievance over credit for a ceasefire, then the established idea that global economic order is rule-bound stands seriously weakened. It also raises an unsettling question: did India’s refusal to publicly endorse Trump cost it economic retaliation it chose not to publicly acknowledge?

The silence from the highest political level only deepens this uncertainty. In an environment where Trump continues to publicly claim authorship of multiple global peace outcomes—from Kosovo to Armenia—India’s decision to neither affirm nor sharply refute his India–Pakistan claim has allowed ambiguity to metastasize into policy consequence. Diplomacy, in such conditions, begins to resemble theatre more than negotiation.

The deeper concern is not whether Trump exaggerated, or whether Pakistan tactically flattered, but what this episode signals for the future of international order. When trade penalties, military de-escalation, Nobel nominations, and oil contracts all become bargaining chips in a single personality-driven power game, the structural predictability that middle powers like India rely upon begins to erode.

Rajan’s concluding hope—that “sanity prevails on all sides”—reads less like a platitude and more like a warning. The current turbulence is no longer confined to runways of trade negotiations or oil corridors. It has entered the unstable airspace of political ego, where truth is negotiable and tariffs become tools of narrative punishment. For India, the immediate costs are measurable in export data. The long-term cost, however, may lie in learning how fragile economic sovereignty becomes when diplomacy slips from strategy into spectacle.