Navigating Trade Headwinds: India's Strategic Imperative

By Rajat Kathuria, Shiv Nadar University, Delhi-NCR.

The sojourn of a US squad to India for the sixth circular of negotiations connected tariffs has been postponed from August 25 to an unspecified aboriginal date, according to quality reports. Meanwhile, a 25 percent tariff connected Indian exports is successful effect from August 1. This 25 percent tariff, a flimsy accommodation from the primitively threatened 26 percent, is accompanied by an further 25 percent punishment connected India for its purchases of crude lipid and defence instrumentality from Russia, yielding a total tariff of 50 percent. The further punishment is acceptable to instrumentality effect connected August 27, and volition marque India 1 of the astir heavy taxed US trading partners.

The usage of commercialized argumentation by countries to execute home governmental and geostrategic goals is not new. However, what was erstwhile a much guarded and constricted practice, often involving a subtle bending of rules, has evolved into a blatantly assertive approach, with small to nary effort to run wrong established multilateral norms. Tariffs person been weaponised. 

This has been enabled by the US government’s stifling — since December 2019 — of the dispute colony relation of the World Trade Organization (WTO), the lifeblood of the multilateral system. With nary disputes being settled, mightiness becomes right, allowing almighty nations to enforce their volition without accountability. A superior crushed wherefore countries specified arsenic India and galore smaller nations embraced the multilateral trading system, and proceed to enactment it, is precisely to forestall specified bullying and guarantee that the instrumentality of the jungle is avoided successful planetary commerce.

We whitethorn inactive get there, but lone aft caller events nonstop a hefty toll. Trust volition beryllium the biggest casualty. Rebuilding it volition necessitate years of diligent diplomacy, on with free-flowing goods and services crossed borders to service arsenic impervious of intent. Trust, aft all, is simply a commodity successful abbreviated proviso these days. As the inimitable Sir Humphrey from the governmental satire series Yes, Minister once declared to his minister: “The Civil Service is not successful the concern of creating artificial shortages.” Nor, for that matter, is the government.

The caller equilibrium, erstwhile reached, volition beryllium devoid of immoderate of the niceties that defined the earlier multilateral system. For example, peculiar provisions for processing countries, collectively known as Special and Differential Treatment, and preferential marketplace entree schemes specified arsenic the Generalized System of Preferences, designed to assistance them integrate into the planetary trading system, volition look precise different. 

A wide crushed is the emergence of hyper-nationalism, with almighty nations showing small appetite to assistance concessions to poorer nations and alternatively demanding reciprocity. But what does reciprocity mean betwixt 2 countries, 1 with a per capita income of $US 90,000 and the different struggling astatine $US 1,000? 

Against this background, the caller US tariff imposition connected respective countries, notably India, is the astir palpable manifestation of the caller regime. 

US demands and India’s options

Justifications, dissimilar trust, are ne'er successful abbreviated supply. While India’s acquisition of Russian lipid is the contiguous trigger for the further 25 percent tariff, the US administration’s broader justification extends to different perceived grievances, including the accusation that India is the “maharaja of tariffs”. President Trump has even called India’s tariff authorities “obnoxious”. 

The US has besides expressed vexation with India’s reluctance to unfastened definite sectors, particularly agriculture and dairy, arguing that its protectionist stance harms American farmers and businesses. US lobbies are keen to merchantability much cheese, milk, maize, soy, maize and different genetically modified products. Add nuts and fruits, and the menace to India’s immense agriculture and dairy assemblage — together, they relationship for astir 45 percent of employment and enactment much than 80 cardinal farmers — becomes clear.

For India, this has been a reddish enactment owed to the overwhelming fig of tiny farmers, and the perchance damaging governmental consequences. Allowing heavy subsidised US workplace produce, including from animals that whitethorn person been fed meat, would spell governmental disaster. This is particularly existent erstwhile the authorities has had to look terrible disapproval connected the unsuccessful argumentation to treble husbandman incomes. What’s more, the infamous farm laws had to beryllium withdrawn, and massive, pitched husbandman protests had to beryllium managed. 

In this background, adjacent a nuanced and constricted opening of agriculture that protects tiny husbandman involvement would autumn prey to a communicative of the woody being anti-farmer and therefore, against nationalist interest. For this reason, India has maintained its protectionist stance successful recent Free Trade Agreements (FTAs) with Australia and the UK. The US, meanwhile, seeks to weaken India’s long-standing ties with Russia and align India much intimately with its ain geopolitical objectives.

The latest tariffs are expected to deed respective Indian export sectors—how hard, lone clip volition tell. Initial estimates suggest industries specified arsenic textiles and apparel, gems and jewellery, shrimp and marine products, integrated chemicals and carpets could spot export declines of much than 50 percent, due to the fact that their slim nett margins marque it hard for them to sorb specified precocious duties. Competitors specified arsenic Vietnam, Bangladesh and Pakistan are apt to benefit. 

According to the Engineering Export Promotion Council, India’s exports of aluminium and related products plunged by 58 percent year-on-year, portion robust and alloy exports declined by 40 percent in February 2025, adjacent earlier the afloat implementation of the caller duties. The car constituent manufacture faces sizeable exposure. Nearly 50 percent of India’s $US 7 billion in car parts exports to the US is expected to beryllium impacted by the caller tariff regime, which includes levies of up to 50 percent connected respective merchandise lines. 

While sector-specific impacts vary, these figures suggest that export declines successful the scope of 30–50 percent—particularly successful aluminium, iron, steel, and car components—are some plausible and already unfolding successful effect to the US protectionist shift. 

Pharmaceuticals, electronics and vigor products are presently exempt, but the fickle quality of caller US commercialized argumentation inspires small confidence. Goldman Sachs projects a potential 0.1-0.6 percent constituent hit to India’s GDP maturation owed to disruption successful labour-intensive industries and antagonistic knock-on effects. Multipliers enactment successful some directions—in this case, downward.

Way ahead

India has condemned the tariffs as “unfair, unjustified and unreasonable”, and argues it has a close to unafraid vigor and employment information for its radical against specified blatant economical aggression. The authorities is weighing its options: continuing high-level talks with the US, diversifying export markets to the European Union (EU) and Latin America, and intensifying the Make successful India inaugural to boost home production. 

The state mightiness besides diversify crude lipid imports implicit time, portion moving with different members of the BRICS (Brazil, Russia, India, China, South Africa) grouping of nations connected unified responses and alternate commercialized and outgo systems. India could besides see challenging these tariffs astatine the WTO, though the effectiveness of specified a situation is presently uncertain owed to the WTO’s paralyzed quality colony function.

The US’ expansive plan of coercive unilateralism, utilizing its economical mightiness to enforce overseas argumentation objectives, makes for a decidedly unequal contest. A 50 percent tariff from India’s largest export market presents an unsustainable proposition for India’s declared economical aspirations. 

High tariffs, whether imposed by India oregon against it, contradict the ambition of leveraging a “China Plus One” strategy to pull planetary worth chains. Securing the relocation of planetary worth chains to India requires, supra all, a debased tariff authorities and different facilitative measures. A US-India commercialized pact could beryllium 1 specified measure, but lone if India negotiates benefits that service its interests. That volition necessitate guile and gumption.

For India, robust export markets are the indispensable instauration for economical progress, a acquisition powerfully demonstrated by China’s humanities engagement with unfastened planetary markets. At a clip erstwhile multilateral commercialized is not moving well, the imperative to make request indispensable beryllium met done strategical FTAs, including the pending pact with the EU. 

This infinitesimal calls not for extravagant rhetoric, but for astute and pragmatic engagement. Even arsenic Goliath holds a commanding presumption with each the trump cards successful this caller epoch of weaponised trade, India indispensable strive to technologist its ain “David moment” done intelligent strategical action. 

Sustained home structural reforms, peculiarly successful labour, taxation, and easiness of doing business, among others, volition beryllium important to enhancing India’s export competitiveness and boosting productivity astatine home, offering an essential, albeit incomplete, remedy to the emerging planetary order.

Originally published nether Creative Commons by 360info™.

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