Trump suspends the Graham Act’s 100 percent secondary tariffs, handing India and China a reprieve while Treasury Secretary Bessent blames Europe for refusing to share the burden
WASHINGTON, OCTOBER 19, 2026
President Donald Trump has suspended the tariff and sanctions machinery of the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, pulling back from the brink a measure that would have authorized duties of up to 100 percent on goods from the five largest buyers of Russian crude oil and natural gas. The executive order, signed October 16 and reported across Indian and American outlets through the weekend, arrived days before the statute’s penalties were scheduled to bite.
The suspension removes, for now, the single largest unpriced risk hanging over American import costs this quarter. It also exposes a rift inside the Western coalition that the administration spent much of the year trying to assemble. In a Sunday interview on NBC’s “Meet the Press,” Treasury Secretary Scott Bessent said the United States had asked European allies in the spring to impose parallel secondary tariffs on China and India over their purchases of Russian energy, and that the allies declined.
“They refused,” Bessent said, according to an Asian News International account of the interview datelined Washington, October 18. “So why should the US bear the burden?”
That question now sits at the center of the administration’s Russia policy and, by extension, at the center of the tariff schedule facing thousands of American importers. The Graham Act, signed into law on September 18, gave the president authority to tax the goods of countries that continued to buy Russian hydrocarbons after a statutory cutoff. India and China, the two largest buyers by volume, were the obvious targets. Both are also major suppliers to the American market, which is precisely why the authority was always going to be difficult to use.
How the Graham Act came to be
The statute that Trump suspended this week began life as a bipartisan vehicle. Named for Senator Lindsey Graham, its lead sponsor, the Sanctioning Russia and Iran Act of 2026 was built around a theory of economic coercion that had circulated in Washington for the better part of two years: that Russia’s war financing depends less on the price of its crude than on the willingness of a small number of large buyers to keep taking it, and that those buyers can be moved by the threat of losing access to the American consumer market.
The mechanics reflected that theory. Rather than sanction Russian entities directly, a tool that years of use had blunted, the law reached the buyers. It identified the five largest purchasers of Russian-origin crude oil or natural gas and authorized duties of up to 100 percent on their goods entering the United States if they made new purchases after a statutory deadline. The design was deliberately indirect. The pain would land on Indian refiners and Chinese utilities, and through them on the governments that license their imports.
Trade economists warned from the outset that the incidence would not stay where the drafters intended. A tariff is paid by the importer of record, and the importer of record in nearly every case would be an American company. The theory of the statute required that the exporting country’s government feel enough pressure to change policy before the American purchaser felt enough pain to change supplier. In sectors where substitution is slow, that sequencing is doubtful.
The bill nonetheless moved quickly, passing with support from members who had grown frustrated with the pace of the war and signed into law on September 18. The deadline for its tariff provisions fell in mid-October, which is why the executive order dated October 16 arrived when it did.
## What the order does
The executive order suspends key tariff and sanctions provisions of the statute rather than repealing them, a distinction that matters a great deal to anyone writing supply contracts for 2027. Outlook India, which reported the order on October 17, noted that the waiver carries no fixed expiration date and remains in place until the president or senior officials determine that further action is appropriate. The Office of the United States Trade Representative, working with other departments, is directed to monitor purchases of Russian energy and report back to the president.
Bessent framed the pause in terms of a defined assessment window, telling NBC that the legislation gives the president 60 days to evaluate the situation. The practical effect is that the authority sits loaded and unfired. Importers who spent September modeling a 100 percent duty on Indian pharmaceuticals or Chinese electronics can stand down, but they cannot clear the scenario from their risk registers.
Secretary of State Marco Rubio, whose remarks were reported alongside Bessent’s, offered the diplomatic rationale. Rubio called India an important ally and said Washington must weigh its own energy needs before imposing tariffs or sanctions. He acknowledged that India has diversified its energy supply but cannot stop importing Russian energy overnight. Rubio also indicated that progress toward a bilateral trade arrangement with New Delhi was among the factors in the decision.
The numbers behind the reprieve
The stakes for India are easy to quantify and large. The United States imported roughly 86.9 billion dollars of Indian goods in 2024, according to Global Trade Alert’s modelled tariff estimates, and the average applied US tariff on Indian merchandise now stands at approximately 18.1 percent across 97 chapters of the harmonized schedule. That average already reflects a year of escalation. Layering a 100 percent secondary duty on top of it would have been, in practical terms, an embargo on several of India’s most valuable export lines.
The exposure is concentrated. Pharmaceuticals are India’s single largest shipment category into the American market, and the modelled rate on the leading medicament line already sits near 43.8 percent on roughly 10.6 billion dollars of 2024 trade, a figure built from the base schedule plus Section 232 pharmaceutical duties, emergency tariffs and Section 301 measures. Chapter 30 as a whole, covering pharmaceutical products, carries an average modelled rate of about 42.7 percent on 12.5 billion dollars of trade. Chapter 73, articles of iron or steel, averages roughly 45.1 percent. Doubling those figures would have closed the lanes outright.
Other categories tell a different story and explain why a blanket secondary tariff was always a blunt instrument. Smartphones and related telecom equipment, India’s second largest export line at nearly 6.9 billion dollars, currently clear at a modelled zero percent. Petroleum oils, about 3 billion dollars, also clear at effectively zero. A 100 percent across-the-board secondary duty would have taken lines that currently enter duty free and made them the most heavily taxed goods in the tariff schedule, with the cost falling on American handset assemblers, hospital systems and refiners rather than on Russian producers.
Bessent’s case against Europe
The Treasury secretary’s complaint about European free riding came with figures. Bessent cited 140 cargoes shipped from Russia’s Yamal liquefied natural gas facility in the first six months of the year, of which he said 136 went to Europe, placing the value at more than 8 billion dollars. The implication was pointed: the allies that declined to tax Indian and Chinese goods over Russian energy purchases were themselves the destination for the overwhelming majority of one of Russia’s flagship energy exports.
Bessent also pushed back on the suggestion that the waiver signals softness toward Moscow, saying no administration has been tougher on Russian sanctions than this one. On the broader conflict he said, “President Trump has made it clear he wants the killing to stop.”
Trade lawyers reading the sequence see a familiar pattern. The Graham Act followed the template of recent American trade statutes by delegating broad authority to the executive and then relying on the executive to calibrate it. Congress wrote the maximum rate; the White House decides whether and against whom it applies. That structure gives the administration leverage in bilateral talks and gives importers very little certainty.
Reaction and the India channel
New Delhi’s response has been measured. Indian officials had warned through the autumn that additional tariffs would strain a relationship the two governments have spent two decades building, and the warning appears to have registered. The waiver is not drafted as India specific, and Chinese exporters benefit from the same suspension, but the Indian trade press treated it unambiguously as relief for India.
Not every signal from Washington has been encouraging. A report published October 18 by Pakistani outlet 24NewsHD argued that warmer American ties with Islamabad, combined with the broader tariff campaign, continue to hold up the US-India trade deal. The two tracks are connected: the energy tariff threat was one of New Delhi’s principal grievances, and removing it clears an obstacle without resolving the underlying negotiation over market access, agricultural tariffs and digital rules.
For American importers, the immediate question is whether to treat the pause as durable. The honest answer is that it depends on a presidential determination that has no published criteria. The statute’s authority survives. The USTR monitoring mandate means the administration will have a documented record of Russian energy purchases to point to whenever it decides to reactivate the measure. Nothing in the order constrains that decision.
Industry reaction
Reaction across American import-dependent sectors has been relief tempered by the recognition that nothing structural has changed.
Generic pharmaceutical purchasers had the most at stake and were the most vocal through the threat period. Chapter 30 of the tariff schedule, pharmaceutical products, accounts for roughly 14.4 percent of the value of American imports from India, and the modelled average rate on that chapter already sits near 42.7 percent. Buyers argued through the autumn that the existing rate was already testing the economics of low-margin generics and that a doubling would push multiple molecules out of the American market entirely rather than reroute them.
Electronics assemblers and contract manufacturers made a different argument, grounded in the policy’s own history. Much of the Indian electronics capacity now shipping into the United States exists because American firms moved it there, often at government urging, to reduce dependence on Chinese suppliers subject to Section 301 duties. Taxing the relocated capacity at a higher rate than the capacity it replaced would have punished exactly the behavior that American industrial policy has spent several years rewarding.
Jewelry and precious stone importers, a less visible but substantial channel, also lobbied against the measure. Chapter 71 represents about 13.3 percent of Indian shipments to the United States, with the largest line, cut diamonds, modelled at 10 percent and a second major line near 15.5 percent. The industry is concentrated in a small number of American cities and operates on margins that do not absorb a hundred-point duty increase.
Steel-intensive manufacturers took the opposite view. Domestic producers have argued consistently that the existing Section 232 architecture is undercut by transshipment and by imports from countries with their own excess capacity problems. For them the Graham Act authority, whatever its stated purpose, represented additional protection. Its suspension removes a tool they would have preferred to keep available.
Agricultural exporters, who sit on the other side of the ledger, have been the quietest and arguably the most relieved. Retaliation has tracked American action closely through this trade cycle, and a secondary tariff of the magnitude authorized would almost certainly have drawn countermeasures aimed at the American farm sector, which has absorbed a disproportionate share of retaliatory targeting in every round since 2018.
## Economic impact
The counterfactual is worth stating plainly because it explains why the waiver was issued. A 100 percent secondary tariff applied to Indian and Chinese goods would have functioned as the largest single tax increase on American consumption in modern trade history. India alone ships roughly 87 billion dollars a year into the United States; China’s number is several times larger. Doubling the landed cost of that combined flow would have moved consumer price indices, not just corporate margins.
The pharmaceutical channel is the most acute. India supplies a large share of the generic drugs dispensed in American pharmacies, and the chapter already carries a modelled average above 42 percent. Hospital group purchasing organizations and pharmacy benefit managers spent the autumn running scenarios in which that number doubled. Those scenarios ended with shortages rather than substitution, because the qualification timelines for alternative suppliers run in years, not quarters.
The electronics channel runs the other way. Lines that currently enter at zero would have been hit hardest in relative terms. Contract manufacturers that moved assembly from China to India specifically to escape Section 301 exposure would have found the new destination taxed at twice the rate of the old one. That outcome would have unwound several years of supply chain diversification that American policy had actively encouraged.
The energy market effect of the suspension is subtler. Secondary tariffs were designed to shrink the pool of buyers for Russian crude and compress the discount Moscow receives. Suspending them removes that pressure. Bessent’s argument is that the pressure was never going to work unilaterally, and that American importers should not pay for a policy the Europeans declined to join.
The coalition problem
Bessent’s Sunday remarks did more than assign blame. They described, accurately, the structural weakness of secondary tariffs imposed by a single country.
The logic of a secondary tariff depends on the target having nowhere else to sell. If the United States taxes Indian goods over Indian purchases of Russian crude, and the European Union does not, then the Indian exporter’s calculation is whether the American market is worth more than the Russian discount. For high-value, hard-to-substitute goods the answer may be yes. For commodity manufactures sold into a global market, the answer is often no, and the trade simply reroutes.
Unilateral action also carries a reputational cost that coalition action does not. A measure joined by the European Union, the United Kingdom, Japan and Canada reads as an international norm. The same measure taken alone reads as an American commercial decision dressed in security language, which is precisely how it is characterized in the capitals being targeted.
Bessent’s Yamal figures were offered as evidence that the Europeans lack standing to object. If 136 of 140 cargoes from a single Russian liquefied natural gas facility went to European buyers in the first half of the year, worth more than 8 billion dollars by his account, then European reluctance to tax Indian and Chinese purchases of Russian energy looks less like principle than like self-interest. Whether that argument persuades allied capitals or simply hardens them is an open question. What it clearly does is give the administration a public rationale for standing down without describing the retreat as a retreat.
Modelling the burden that was avoided
A useful way to size the suspended measure is to ask what it would have done to the average tariff facing a single trading partner.
India’s modelled average applied rate across all 97 chapters currently stands at about 18.1 percent. That figure is itself the product of a year of layering: the base harmonized schedule, Section 232 actions on pharmaceuticals and metals, emergency tariffs and Section 301 duties all contribute. The Graham Act authority would have sat on top of the entire structure rather than replacing any part of it.
The arithmetic is not a simple addition, because the authority applied to goods rather than uniformly to value and because the five-buyer trigger has its own definitional edges. But the direction is unambiguous. On the pharmaceutical line alone, a rate already near 43.8 percent on 10.6 billion dollars of trade would have moved into territory where American purchasers would have stopped buying. The relevant question would have shifted from cost to availability.
The distribution matters as much as the average. Roughly a fifth of Indian shipments by value currently enter the United States at or near zero, including the largest telecom equipment lines and refined petroleum products. Those are the flows that a flat secondary duty would have disrupted most violently, because the firms importing them have built their cost structures around duty-free entry and have no tariff engineering headroom to absorb a shock of that size.
## What importers and exporters should do
Three practical implications follow.
First, classification work done under the threat scenario should be preserved, not discarded. Importers who mapped their Indian and Chinese exposure by harmonized tariff schedule line now have an asset. If the authority is reactivated, the lead time between announcement and effective date is likely to be short, as it has been for every major action this administration has taken. Firms that have the mapping already done will be able to respond in days rather than weeks.
Second, contracts signed in the next two quarters should address the suspended authority explicitly. A force majeure clause drafted for supply disruption does not generally cover a tariff change, and a change in law clause that refers to tariffs “in effect” may not capture a suspended statutory authority that is later revived. Counsel should consider naming the Graham Act and defining who bears the cost if the waiver lapses.
Third, the duty drawback and first sale valuation planning that firms deferred during the threat period should resume. Those techniques reduce exposure under the tariffs actually in force today, which remain substantial. An 18 percent average on Indian goods and a modelled 42 percent on pharmaceuticals are not hypothetical risks; they are current costs that competent customs planning can sometimes reduce.
Exporters face a quieter version of the same calculation. Retaliation against American goods has generally tracked American action. A suspension that de-escalates the energy tariff channel reduces the probability of new Indian or Chinese countermeasures in the near term, which matters for American agricultural exporters and for the aerospace and machinery lines that India buys in volume.
The wider pattern
The Graham Act suspension fits a pattern visible across the administration’s 2026 trade record. Authority is sought, granted, threatened and then held in reserve. The Section 301 forced labor tariffs imposed on 60 economies in July, the Section 232 actions on polysilicon and semiconductors, the Section 338 proclamations aimed at Canada, and now the Russia energy authority all share the structure: a broad legal instrument, a wide target list and a discretionary trigger.
For trade compliance departments the consequence is that the tariff schedule has become a function of diplomacy rather than a fixed input. Rates can change on a presidential signature, and the signature can be withdrawn as easily as it is given. The suspension announced this week is good news for importers of Indian and Chinese goods. It is not, on any reading of the order, a resolution.
Bessent’s Sunday framing suggests the administration will keep making the burden sharing argument. Whether that argument eventually produces European participation, or simply provides a rationale for leaving the authority dormant, will determine how long this reprieve lasts.