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Putting in place long-term policy framework on trade, investments, currencies, geo-political alignments to protect Bharat’s interests must be priority

United States President Donald Trump’s adversarial tariff policy on India has largely been regarded ‘flip-flop’ hinting at fluid stance and diabolical in spirit and content.

From being most favoured trading ally with minimal tariff proposal of 10 per cent in April 2025, India has been bracketed in the list of enemy countries that attract highest impost of 50 per cent.

Numbers and data apart, there has been a lot of noise, nervousness and anxiety as clock ticked 4 pm in last few days in India. It’s at about that time of the day Trump first announced 25 per cent and later doubled it to 50 per cent triggering a flurry of activity.

Old-timers did not miss the drama, show, and high-decibel drama that Trump put on these days targeting one or other trading partners. It was the turn of Bharat in the last few days.

A 21-day window announced for tariffs to kick in signalled that Trump was open to negotiation before inking the trade deal. It’s one way of exerting pressure on New Delhi’s negotiators to sign on a ‘bad trade deal’ which means granting US unhindered access to agriculture, fisheries and dairy sector in India.

President Trump’s optimism to drive a hard bargain also reflects from his statement, “it’s only been eight hours, let’s see what happens…you are going to see a lot more and some secondary sanctions."

The eight-hour time frame referred to by Trump hints at his ‘wait, watch and strike’ attitude in the midst of serious negotiations.

Contrary to drama associated with Trump’s diatribe, India’s response has been mature, measured and nuanced in last fortnight within and outside the parliament. Unreasonable, unfair and unjustified is how India described Trump’s executive order on 50 per cent levy.

For the first time, Prime Minister Narendra Modi stuck his neck out and took it upon himself the consequences of tariffs tantrums thrown by President Trump.

Modi said unequivocally that he was willing to pay a heavy personal price as Trump’s tariffs would impact large number of labour-intensive and rural sectors.

First, Prime Minister Modi has taken personal responsibility for the impact trade pact and tariffs would have on 1.4 billion plus Indians.

Modi’s statement at M.S.Swaminathan International Centenary Conference on Thursday is very significant. He’s not willing to compromise on protecting farmers, rural people interests and labour-intensive industrial sectors.

Also, he was willing to face the political flak and pay heavy personal price on consequences given opposition parties’ intransigent line on United States. Prime Minister Modi understands that throwing open the agriculture sector to US is not only economically unviable but politically unsalable to the core Hindu vote bank, Sangh parivar and the ecosystem.

On factual analysis, the Modi government will have to deal with adverse impact on GDP growth of 0.2-0.4 per cent in case tariffs finally stay at 25 per cent during this fiscal. Top analysts estimate that entire US $ 86.5 billion annual goods exports from India to United States may turn non-competitive or commercially viable.

Given that the US is top market for India and constitutes about 18 per cent of its global goods exports and constitutes 2.2 per cent GDP, strains have begun to appear on near future.

Given Prime Minister Modi’s steadfast commitment to protect India’s national interests, Indian negotiators are breathing easy.

The proposed 50 per cent duties, if they kick in finally, translate to unannounced trade sanctions or embargo on India thereby worsening the strain in relations between the two countries.

One big fallout that’s largely speculated was that India may not buy F-35 stealth fighter jet aircraft from United States. Factual position so far is that after US offered to sell these jets, formal negotiations have not yet begun. And, these discussions may remain a non-starter.

Secondly, India may consider imposing retaliatory duties on 28 US products including its apples and walnuts given the precedent in 2019 to counter restrictive levies Washington DC had imposed on Indian steel and aluminium products.

Thirdly, the arc of disengagement between India and US may widen for the time being unless recalibrates its trade and tariff policies.

Fourthly, an aggressive campaign may be launched by the ruling party and the government to go local and opt for ‘made in India’ products and services.

Fifthly, Prime Minister Narendra Modi may mobilise people in socio-economic spheres for adapting ‘swadeshi’.

Sixthly, realigning India’s trade, investment, economic, geo-strategic relations may be a big option. Russia, China and other countries engagement may be enhanced to counter-balance US Republican White House under President Trump’s stewardship. Aligning with countries like Brazil who have been put on high tariff line by US could be an option.

Seventhly, present developments may lead to expanding time-tested foreign policy of strategic autonomy to protect India’s offensive and defensive interests. This may also be the right moment to promote south – south trade engagement.

Eighthly, upcoming conclaves of Shanghai Cooperation Organization (SCO), Quad and BRICS may be occasions for India to sharpen its policy framework for global engagement.

Ninthly, evolving an independent financial architecture, decoupling from US dollar or hastening BRICS currency to opt for diversification in payments may also be considered.

Tenthly, putting in place medium and long-term policy on currencies and oil will go the India way.

The author is Director and Chief Executive of non-partisan New Delhi based think tank, Centre for Integrated and Holistic Studies. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views.

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New Delhi, India, India

First Published:

August 08, 2025, 19:38 IST

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