India needs strategic patience to sail through Trump's tariff storm

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On July 30, 2025, US President Donald Trump unveiled a sweeping 25 per cent tariff on Indian exports, effective August 7, alongside threats of penalties for India's continued purchase of Russian oil and military hardware. Justified by Trump as retaliation for India's 'far too high' tariffs and 'strenuous and obnoxious non-monetary trade barriers', this move severely disrupts an expanding trade partnership.
More troubling is the proposed 100 per cent secondary tariff on nations dealing in Russian oil—especially damaging for India, which sources around 35 per cent of its crude from Russia. These measures risk entangling trade, energy security, and defence in a complex geopolitical crossfire.
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India–US Trade Snapshot
India is the US' ninth-largest trading partner, and the US is India's largest export destination. In 2024, bilateral trade (per Indian sources) stood at $136.7 billion—with India exporting $91.2 billion and importing $45.5 billion, yielding a $45.7 billion surplus for India. U.S. data shows bilateral goods trade at $129.2 billion, with exports to India at $41.8 billion and imports from India at $87.4 billion.
This trade imbalance remains a sore point for Washington. While Trump has dubbed India the 'tariff king', the actual weighted average tariff on US imports is under 5 per cent, well within WTO limits. However, India does levy higher duties on specific items like whisky, wines, and automobiles—similar to protectionist policies adopted by many other nations, including the US.
India's major exports to the US in 2024 included electrical and electronic equipment ($14.4 billion), pharmaceuticals ($12.73 billion), and precious metals and stones ($11.88 billion). Conversely, US exports to India comprised mineral fuels ($12.6 billion), precious stones ($5.31 billion), and machinery ($3.29 billion), along with soybeans ($2.2 billion).
Tariff Dynamics Before the Trump Shock
Before Trump's announcement, US tariffs on Indian goods averaged 2.5 per cent, while Indian duties ranged from 10 per cent to 80 per cent depending on the sector—with high rates on agricultural products like apples and rice. Non-tariff barriers, especially in agriculture and pharmaceuticals, have long frustrated US businesses. Trump has used tariffs as a pressure tool to counter the trade deficit under the guise of protecting US industries.
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From India's perspective, the US administration has ignored the significant American advantage in India's services and education sectors. Furthermore, India's obligations to safeguard farmers' livelihoods, sensitivities regarding dairy products, ensure energy security, and maintain affordability restrict its capacity to yield to US expectations.
Fallout
The new 25 per cent tariff raises average duties on Indian goods to 27 per cent, affecting key sectors such as auto parts, electronics, steel, and aluminium. Even iPhones assembled in India may see price hikes. Projections suggest a 10 per cent to 50 per cent drop in Indian exports in these sectors—amounting to annual losses of up to $3 billion.
India, with 1.4 billion people and the world's fourth-largest economy, aims to double trade with the US to $500 billion by 2030. However, Trump's tariffs threaten this goal, potentially trimming 0.3–0.5 per cent off India's projected 6.5 per cent GDP growth for 2025 (as per HSBC).
For US consumers, these tariffs will likely spark inflation, especially in healthcare affordability. Tariff revenues—estimated to constitute 5 per cent of federal income in 2025—are intended to offset Trump's tax cuts and support domestic manufacturing. Yet economists, including JP Morgan, predict a US GDP slowdown to 1.6 per cent and supply chain disruptions, given India's crucial role in supplying generics, pharmaceuticals, and electronics.
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Strategically, these tariffs risk alienating a key Indo-Pacific partner, undermining US efforts to counter China. The punitive measures could push India closer to the Russia-China-India (RIC) alignment.
India imported $40 billion of Russian oil in 2024 (forming 35 per cent of India's energy imports). A 100 per cent secondary tariff on this trade would spike India's import bill, increase inflation, strain fuel subsidies, and derail fiscal targets—especially problematic in an election year. In defence, India's 36 per cent dependency on Russian arms (down from 55 per cent in 2019) makes it vulnerable to US sanctions, particularly regarding high-value systems like the S-400. While compliance compromises strategic autonomy, non-compliance risks further penalties. Given the perceived unreliability of US foreign policy, India may be inclined to take calculated risks.
A Web of Sticking Points
Agriculture is India's red line. The US demands greater access to India's protected agricultural market, particularly in dairy and grains. But with 45 per cent of the population reliant on farming, India faces high political costs in liberalising this sector.
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India is unlikely to emulate US allies like Japan or the EU in offering zero-tariff concessions, owing to security dependencies. Indian exports of auto parts, steel, aluminium, and electronics face the steepest tariffs. Less-affected sectors like textiles and gems may still lose market share to Vietnam and Bangladesh. In retaliation, India could target US exports such as soybeans and aircraft—although this could impact its aviation sector if the UK cannot meet shortfalls.
Domestic Compulsions
India's trade policy is constrained by domestic politics. Any concessions on agriculture risk electoral backlash. Micro, Small, and Medium Enterprises (MSMEs), which drive Indian exports, would be severely impacted by higher US tariffs. Energy security remains paramount, and Russian oil provides affordable options not easily replaceable.
Strategic autonomy underpins India's foreign policy. Aligning too closely with either Washington or Moscow would compromise this balance. Given Trump's recent policy unpredictability, abandoning a reliable partner like Russia seems unjustified.
Balancing Act
Trump's tariff blitz leaves India with limited but critical choices. These include:
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Negotiate a Selective Trade Deal: India may pursue a limited deal, lowering tariffs on non-sensitive imports like machinery, liquor, hydrocarbons, motorbikes, and soybeans—while resisting US demands on agriculture and dairy. It must stand firm on energy affordability for its vast poor population.
From August 1, 2025, India should absorb the tariffs temporarily without rushing into a disadvantageous deal. It should protect MSMEs, prioritise growth, and wait out the 10-day deadline on secondary tariffs, monitoring US–China negotiations. This appears to be the most prudent approach.
Diversify Markets: India should expand exports to Asean, the EU, and Africa. Deepening ties with Brics nations can also cushion the impact. Though these markets lack the scale of the US, diversification reduces dependency and future coercion risks. Aggressive pursuit of FTAs and strategic partnerships is essential.
Strategic Reduction in Russian Trade: India can gradually diversify oil imports to the Middle East or the US and broaden arms sourcing to France, Israel, and others. However, higher costs and strong Russia ties complicate this transition. India can redirect exports to Asean, the EU, and Africa, though with smaller profit margins.
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Self-Reliance: Strengthening the Atmanirbhar Bharat campaign for defence and tech manufacturing is vital. Past disruptions, like Covid, have shown India's capacity to localise supply chains—a trend that must accelerate.
Controlled Retaliation: If unavoidable, India must retaliate proportionately with tariffs on high-profile US goods like aircraft, oil, whisky, and motorcycles. Such a move risks escalation but may be necessary to defend sovereignty and prevent future coercion.
Brics
Brics nations face similar US tariffs—34 per cent on China, 50 per cent on Brazil. The concept of a coordinated Brics response is attractive but lacks momentum. India-China rivalry and Russia's economic constraints limit cohesion. While alternate payment systems (eg, rupee-ruble trade) are being explored, intra-Brics trade ($700 billion) pales in comparison to their $5 trillion trade with the US.
However, if Trump follows through with 100% tariffs on BRICS and 500% on countries trading with Russia, he may inadvertently force BRICS closer. This could catalyze a realignment toward the RIC format.
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Realistic Road Ahead
India's optimal response blends diplomacy, economic recalibration, and strategic signalling. A selective trade deal protecting sensitive sectors while retaining competitiveness is key. Simultaneously, India must diversify exports, reduce reliance on Russian oil and arms incrementally, and boost domestic manufacturing.
Subsidies for impacted exporters and tax relief for MSMEs can cushion the blow. By reinforcing its role as a democratic counterweight to China, India can retain geopolitical leverage while defending long-term interests.
Trump's tariff offensive poses serious challenges—but India possesses considerable leverage. Through smart negotiation, diversification, and strategic patience, India can weather the storm and emerge stronger, with a more resilient and self-reliant economic framework. Diplomacy, reform, and national resolve will be India's guiding tools in navigating this turbulent phase.
The author is a strategic and security analyst. He can be reached at Facebook and LinkedIn as Shashi Asthana, @asthana_shashi on Twitter, and personal site. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost's views.