Faced with newly imposed tariffs by the United States, India is adopting a two-pronged strategy: continuing to pursue a trade deal with Washington while actively seeking alternative trade partners. The US imposed a 50 percent tariff on Indian goods, which went into effect on Wednesday, making India one of the highest tariffed countries by Washington. President Trump announced the tariff increase as a punishment for India's continued purchases of Russian oil.
The tariffs have upended the once-warm diplomatic and trade relationship between the two countries. In 2024, the U.S. imported $87.3 billion worth of Indian goods. A 50 percent surcharge on India would impact 66 percent of its exports to the U.S. and could slash those exports to $49.6 billion next year. The sectors that would be most affected include apparel, textiles, gems, shrimp, carpets, and furniture exports, potentially endangering hundreds of thousands of jobs.
In response to the tariffs, India is urgently pushing to reroute trade with countries including Brazil, China, Russia, Britain, Japan, Australia, and the EU. Indian officials are expected to hold a series of meetings with industry leaders and global trade counterparts to mitigate the impact of the US tariffs, which threaten up to US$48 billion in exports to the US. Despite the rising tensions, both Washington and New Delhi have signaled openness to resolving their differences. New Delhi is continuing backchannel efforts to communicate its position in Washington through US lawmakers and the Indian-American business community.
According to the US Treasury Secretary Scott Bessent, the trade relationship between the US and India is complicated, but he believes that the two countries will eventually come together. He stated that it was not just Russian oil but the slow pace of negotiations that led to the current situation and that India "tapped us along" on tariff talks.
India is standing firm on its red lines regarding a trade pact with the U.S., particularly in protecting its farmers, fishermen, and small businesses. Prime Minister Narendra Modi has expressed his firm commitment to safeguard their interests. The US, on the other hand, seeks lower tariffs and greater market access for its agricultural products, including corn, soybeans, apples, almonds, and ethanol, as well as enhanced market access for its dairy sector.
The goal is to elevate bilateral trade to $500 billion by 2030, a significant increase from the current $191 billion. While both nations aim to finalize the initial phase of the BTA by fall (September-October) of 2025, the sixth round of negotiations, initially scheduled for August 25, has been postponed.
Some experts believe that Trump's tariffs are a strategic blunder that could push India closer to Russia and China. Others suggest that the tariffs could lead India to rethink its overreliance on the US market and explore joining multilateral trade pacts. The Indian government is also pushing a 'Swadeshi' mantra to reduce the economy's reliance on exports.
Despite the challenges, India remains open to negotiations with the US, but it will not compromise on its core interests. The country is also exploring alternative markets and strengthening domestic competitiveness to mitigate the impact of the tariffs.
