• Trumo says US oil company to soon be selected to lead partnership.
• India faces 25% US tariffs, possible penalties over Russian imports.
• Pressure mounting on Modi govt as trade talks with US inconclusive.

In yet another major diplomatic win for Pakistan, US President Donald Trump has confirmed the finalisation of a trade agreement between the two countries, a move that signals growing trust and deepening economic ties between Islamabad and Washington.

The announcement comes as India, still scrambling to finalise a trade deal with Washington, finds itself under growing pressure, staring down hefty 25% tariffs and the risk of penalties over its continued energy ties with Russia.

“We have just concluded a Deal with the Country of Pakistan, whereby Pakistan and the United States will work together on developing their massive Oil Reserves,” Trump wrote on social media.

“We are in the process of choosing the Oil Company that will lead this Partnership.”

Last week, Deputy Prime Minister and Foreign Minister Ishaq Dar said the United States and Pakistan were “very close” to a trade deal that could come within days, after he met with Secretary of State Marco Rubio on Friday.

Under Trump, Washington has attempted to renegotiate trade agreements with many countries that he threatened with tariffs over what he calls unfair trade relations. Many economists dispute Trump’s characterisation.

The US State Department and Pakistan’s foreign ministry, in separate statements after Rubio meets with Dar, said last week the two top diplomats stressed in their discussion the importance of expanding trade and ties in critical minerals and mining.

“Our teams have been here in Washington discussing, having virtual meetings, and a committee has been tasked by the prime minister to fine-tune now,” Dar said last week about US-Pakistan talks.

India slapped with 25% tariff

President Donald Trump said on Wednesday the United States is still negotiating with India on trade after announcing earlier in the day the US will impose a 25% tariff on goods imported from the country starting on Friday.

The 25% tariff, as well as an unspecified penalty announced by Trump in a morning social media post, would strain relations with the world’s most populous democracy.

Later at the White House, the Republican president indicated there was wiggle room.

“They have one of the highest tariffs in the world now, they’re willing to cut it very substantially,” Trump told reporters. “We’re talking to India now – we’ll see what happens … You’ll know by the end of this week.”

The 25% figure would single out India more severely than other major trading partners, and threaten to unravel months of talks between the two countries, undermining a strategic partner of Washington’s and a counterbalance to China.

What the penalty would be was not clear. Trump initially indicated it was for India buying Russian arms and oil, and its non-monetary trade barriers.

When asked about the penalty at the White House, he said it was partly due to trade issues and partly because of India’s involvement in the BRICS group of developing nations, which he described as hostile to the US. 

Trump, in July, said the US will impose an additional 10% tariff on any country aligning itself with the “Anti-American policies” of the BRICS.

The India announcement came as countries face a Friday deadline to reach deals on reciprocal tariffs or have a Trump-imposed tariff slapped on them. Trump on Wednesday signed a proclamation ordering 50% tariffs on certain copper imports, citing national security, the White House said.

Early warning

The White House had previously warned India about its high average applied tariffs – nearly 39% on agricultural products, with rates climbing to 45% on vegetable oils and around 50% on apples and corn.

“While India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non-monetary Trade Barriers of any Country,” Trump wrote in a Truth Social post.

“They have always bought a vast majority of their military equipment from Russia, and are Russia’s largest buyer of ENERGY, along with China, at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE — ALL THINGS NOT GOOD!”

In response to his Truth Social post, the Indian government said it was studying the implications of Trump’s announcements and remained dedicated to securing a fair trade deal with the US.

“India and the US have been engaged in negotiations on concluding a fair, balanced and mutually beneficial bilateral trade agreement over the last few months. We remain committed to that objective,” it said.

Russia continued to be the top oil supplier to India during the first six months of 2025, making up 35% of overall supplies.

The United States, the world’s largest economy, currently has a $45.7 billion trade deficit with India, the fifth largest.

White House economic adviser Kevin Hassett said Trump has been frustrated with the progress of trade talks with India and believed the 25% tariff announcement would help the situation.

The new U.S. tax on imports from India would be higher than on many other countries that struck deals with the Trump administration recently. Vietnam’s tariff is set at 20% and Indonesia’s at 19%, while the levy for Japan and the European Union is 15%.

“This is a major setback for Indian exporters, especially in sectors like textiles, footwear, and furniture, as the 25% tariff will render them uncompetitive against rivals from Vietnam and China,” said S.C. Ralhan, president of the Federation of Indian Export Organisation.

Contentious issues

US and Indian negotiators have held multiple rounds of discussions to resolve contentious issues, particularly over market access into India for US agricultural and dairy products.

In its latest statement, India said it attached the utmost importance to protecting and promoting the welfare of its farmers, entrepreneurs, and small businesses.

“The government will take all steps necessary to secure our national interest, as has been the case with other trade agreements,” it said.

The setback comes despite earlier commitments by Prime Minister Narendra Modi and Trump to conclude the first phase of a trade deal by autumn and expand bilateral trade to $500 billion by 2030, from $191 billion in 2024.

Since India’s recent military conflict with Pakistan, New Delhi has been unhappy about Trump’s closeness with Islamabad and has protested, which has cast a shadow over trade talks.

“Politically, the relationship is in its toughest spot since the mid-1990s,” said Ashok Malik, partner at advisory firm The Asia Group. “Trust has diminished. President Trump’s messaging has damaged many years of careful, bipartisan nurturing of the US-India partnership in both capitals.”

Besides farm products access, the US had flagged concerns over India’s increasingly burdensome import-quality requirements, among its many non-tariff barriers to foreign trade, in a report released in March.

The new tariffs will impact Indian goods exports to the US, estimated at around $87 billion in 2024, including labour-intensive products such as garments, pharmaceuticals, gems and jewellery, and petrochemicals.