India Bets on SCO to Blunt the Edge of US Tariffs and Sanctions

When Washington doubled tariffs on Indian exports this August, the message was unmistakable: trade has become a weapon, and India one of its major targets. US President Donald Trump raised duties to a punishing 50% on exports ranging from textiles, gems, chemicals to footwear and furniture. These sectors account for more than half of India’s $87 billion in annual shipments to the US. 

The tariff blow is not just a line on a spreadsheet. Stripping $25 billion–$55 billion from export earnings and slicing a third of a percentage point off growth would be bruising enough, economists warn. But the symbolism was worse. Within days, the rupee slumped to 88.33 to the dollar and equities lost nearly ₹200 billion in value. The Reserve Bank’s firefighting steadied nerves only briefly.

Domestic industry lobbies immediately pressed for GST cuts, tax relief, and easier credit. Yet India’s answer to this disruption unfolded not in Delhi but in Tianjin, at the Shanghai Cooperation Organisation summit.

Strategic Ballast

The SCO was once dismissed as a Eurasian security club. With the addition of Iran and Belarus, it now spans from the Indian Ocean to Eastern Europe and covers nearly half the world’s population. For India, it has become less a geopolitical alignment than an economic hedge, a stabiliser against volatility in Atlantic and Pacific markets.

The clearest example is energy. India–Russia trade hit a record $68.7 billion in 2024–25, almost double pre-Ukraine war levels, with crude oil at the centre. Russia now provides 35% of India’s oil imports, up from just 2% in 2020, delivering savings estimated at $10 billion–$25 billion. That shift has blunted the impact of Western energy inflation and widened India’s bargaining space.

If energy is the anchor, connectivity is the scaffolding of India’s Eurasian hedge. The International North–South Transport Corridor has lifted freight volumes by almost a fifth, shaving a third off costs and 40% off journey times compared with the Suez Canal. The Chennai–Vladivostok sea link has cut the voyage to Russia’s Far East from 40 days to 24, while Chabahar gives Delhi a foothold in Central Asia without crossing Pakistan.

The summit also advanced frameworks for harmonised customs, digital trade facilitation, and settlements in local currencies. Such mechanisms are not abstract: they are critical for lowering transaction costs and insulating trade from financial sanctions.

Just as crucial are the resources flowing through these routes. Kazakhstan is the world’s leading uranium producer; Turkmenistan and Uzbekistan sit on hydrocarbons and metals; Russia still supplies rare earths. The logic for Delhi is straightforward: import raw materials, process them at home, and ship finished products abroad. It is supply chain resilience dressed up as industrial strategy.

Risks Ahead
The economic logic is clear, but so are the risks. China’s dominance within the SCO makes Beijing a rule-setter in ways that do not always serve Indian interests. There is also the danger of secondary sanctions. The United States has already linked tariff relief to lower Russian oil imports. Tighter integration with Eurasia could invite fresh penalties.

Yet the SCO’s multilateral nature provides India with a degree of diplomatic cover. Acting within a regional forum is less provocative than bilateral deals with Moscow or Tehran. Moreover, plans for a development bank and a 2035 strategy suggest an institution maturing beyond rhetoric into one that can finance infrastructure and innovation outside Western or Chinese-dominated frameworks.

The point is not that India is abandoning the West. Negotiations with the EU, the UK free trade pact, and cooperation through the Quad remain active. The SCO is ballast, not pivot: a hedge that provides India with cheaper energy, diversified corridors, and new financing options. In an age of tariff wars, such ballast is a form of national security.

Strategic autonomy today is not about choosing sides but keeping multiple doors open. The SCO will not transform the global trade order, but for India it has become a shock absorber, an insurance against the weaponisation of commerce, and a safeguard of its economic resilience.

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