In the landscape of international trade, India has been strategically recalibrating its approach in response to the resurgence of protectionist measures under a hypothetical "Trump 2.0" administration. These measures, characterized by tariff hikes and a focus on domestic manufacturing, have presented both challenges and opportunities for the Indian economy.
One of the most significant developments has been the imposition of tariffs by the U.S. on a range of Indian goods. As of October 2025, these tariffs stood at 50% for most Indian goods, excluding sectors like pharmaceuticals, electronics, and energy. This move, justified under Section 232 and Section 301 of U.S. trade laws, was influenced by India's continued import of Russian oil and its role within BRICS. While India has not announced retaliatory tariffs on US goods, it has reserved the right to act through WTO mechanisms. In a subtle response, India quietly imposed a 30% tariff on US pulses.
In response to these challenges, India has actively pursued diversification of its trade relationships and deepened ties with other global partners. A landmark achievement in this regard is the near completion of the India-EU Free Trade Agreement (FTA), which Commerce Minister Piyush Goyal has called the "mother of all deals". Expected to be signed around January 26-27, 2026, the FTA aims to provide preferential access to all 27 EU member states, creating India's largest free trade agreement in terms of economic scale and regulatory coverage. The EU is India's biggest trading partner, with trade in goods amounting to US$ 135 billion in FY24.
Besides the EU, India has also been proactive in forging trade agreements with other nations and blocs. Since 2021, India has finalized seven Free Trade Agreements (FTAs) and Comprehensive Economic Partnership Agreements (CEPAs), spanning regions including Africa, the Gulf, Europe, and the Indo-Pacific. These agreements cover economies with a combined GDP exceeding $20 trillion. Notable agreements include the Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA), which includes a $100 billion investment commitment over 15 years. Also, the India-UK Comprehensive Economic and Trade Agreement grants tariff-free access for nearly 99% of Indian exports.
These trade diversification efforts are strategically aimed at reducing India's dependence on any single market and enhancing its resilience to external economic shocks. By forging new partnerships and trade routes, India seeks to ensure its continued economic growth and integration into the global economy, irrespective of the trade policies of individual nations.
Domestically, India has focused on reforms to boost manufacturing and improve the ease of doing business. These measures are designed to enhance the competitiveness of Indian industries and offset the impact of tariffs. The government has also emphasized the importance of diversification and technological advancement in India's export basket, targeting sectors such as electronics, engineering goods, and pharmaceuticals.
While the "Trump 2.0" scenario presents challenges, it has also served as a catalyst for India to strengthen its trade relationships, diversify its export markets, and pursue domestic reforms. By strategically leveraging its economic strengths and forging new alliances, India aims to navigate the evolving global trade landscape and secure its position as a major player in the world economy. The country's focus on strategic autonomy and proactive engagement with both allies and adversaries underscores its commitment to safeguarding its economic interests in an increasingly complex and uncertain world.
