Tariff Shock or Gateway of Opportunity?
By Sanjeev Oak
US President Donald Trump has set off tremors in the global trade arena with his announcement of fresh import tariffs ranging from 25% to 40% on 14 countries. For an emerging economy like India, the core question is whether this move spells trouble or opens new doors. From potential shocks to exports to new market openings, the situation will test India’s trade diplomacy like few others.
A calculated pressure move
On Monday, President Trump intensified pressure on America’s trade partners, sending letters to the heads of several nations informing them of his new tariff rates. With the exception of China, he extended the effective date of these tariffs to August 1 — a delay from the initially planned July 9 rollout.
Japan’s Prime Minister Shigeru Ishiba and South Korea’s President Lee Jae-myung were among the first to receive Trump’s letter. His social media post made it plain: from August 1, the tariffs would be enforced across 14 countries. He also issued a blunt warning — “If any country retaliates, the US will double the tariff.”
While announcing the measures, Trump noted that Washington was in parallel talks with India and the European Union over trade agreements. Interestingly, after his tariff declaration on Japan, South Korea and others, Asian markets reacted with modest gains — suggesting investors were betting on negotiated solutions.
“This is not just about trade; it’s about global power equations.”
More than just an economic skirmish
Tariff negotiations between India and the US are no longer mere commercial haggling. They blend trade, global geopolitics, domestic politics and the larger goal of economic self-reliance.
Tensions over tariffs are not new. In 2018, the Trump administration removed India from the Generalized System of Preferences (GSP), prompting New Delhi to slap tariffs on select American goods. Today’s renewed talks hinge on three contentious issues:
- US tariffs on Indian steel and aluminium
- India’s duties on American agricultural and tech products
- India’s WTO “developing country” status, which brings certain trade privileges
For India, a waiver on steel tariffs would be a major win for exporters such as Tata Steel, JSW Steel and SAIL. On the other hand, lowering duties on American farm imports could hurt Indian farmers — making it a delicate balancing act for the government. E-commerce rules are another flashpoint, with US giants Amazon and Walmart pushing for relaxation, opposed by India’s MSMEs and small retailers.
“Balancing Atmanirbhar Bharat with global competitiveness will be the real test.”
Strategic partner, not a junior player
This is not purely a tariff fight. India is a key US strategic partner in the Indo-Pacific and has strengthened its global position through deals with the UK and France. Even India’s recent Securities and Exchange Board of India (SEBI) action against US trading firm Jane Street sent a clear message: New Delhi will not bow to external economic pressure.
Trump’s tariff push is framed domestically as a way to “fix America’s trade deficit” — a campaign promise wrapped in his Make America Great Again slogan. But the 25–40% duties on 14 countries, including Japan, South Korea, Bangladesh and Malaysia, also aim to reorder global trade power in Washington’s favour.
In FY 2023–24, India’s exports to the US stood at $85 billion against imports of $46 billion — leaving a $39 billion surplus in India’s favour, which Trump deems “unfair.” If duties hit Indian goods, it could erode competitiveness in generic medicines, textiles, gems and jewellery, engineering goods and auto parts.
A ripple effect across Asia
The fallout would not be limited to India. Many Asian economies — from Vietnam to Bangladesh — supply textiles, electronics and raw materials to the US. A 30–40% tariff on them could push up prices for American consumers, feeding inflation and political discontent.
Trump’s tariff instinct dates back to his 2018 trade war with China. His “Bring American jobs back” mantra even saw him publicly pressuring Apple to shift iPhone production to US soil — a demand Apple flatly rejected as commercially unviable.
With Washington now eyeing other Asian suppliers, particularly India, New Delhi can use this as leverage. The formula could be quid pro quo: tariff relief in exchange for cooperation in defence, semiconductors or technology manufacturing.
“India has options: diversify markets, impose counter-tariffs, or strike a strategic deal.”
A moment of opportunity — if handled right
India could explore new markets in Latin America and Africa to reduce dependence on US exports, though this will take time. It could also respond with reciprocal tariffs — a high-risk move that may trigger a trade war.
The Indian equity markets dipped briefly after Trump’s announcement but soon stabilised, reflecting investor confidence that India’s diplomatic equation with Washington would prevent an escalation.
In essence, tariffs are as much political and strategic tools as they are fiscal measures. For Trump, they are a way to energise nationalist sentiment ahead of elections. For India, they are a test of resilience and strategic clarity.
From challenge to advantage
Many countries targeted by Trump — Bangladesh (textiles), Malaysia (electronics), Thailand (seafood), South Korea (semiconductors) — compete directly with Indian exporters. If US tariffs erode their market share, India could step in. This is particularly viable in technology, pharma, textiles and auto components.
Trump’s actions could also push Indian companies to deepen local supply chains, giving a boost to Make in India and Production-Linked Incentive (PLI) schemes. In the long term, this could enhance self-reliance while expanding India’s role in global value chains.
“This is a test not just of trade skills, but of India’s strategic and leadership credentials.”
Bottom line:
India must navigate this with a mix of firmness and flexibility — a Chanakya-like diplomacy that defends domestic interests while positioning itself as a stable, credible global partner. Trump’s tariffs may present short-term shocks, but if managed wisely, they could well become a gateway to long-term opportunity.