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The article explores India's strategic response to the tariff threats posed by former US President Donald Trump's administration. Unlike other nations significantly impacted by Trump's trade policies, such as China and Mexico, India largely avoided direct tariff measures. This relative immunity stems from the nature of India's exports. India's key export sectors – pharmaceuticals, auto components, chemicals, textiles, and gems – do not directly compete with major US industries, thus mitigating the risk of retaliatory tariffs. This analysis is supported by Ajai Sahai, Director General of the Federation of Indian Export Organisations (FIEO), who suggests India's lack of direct competition with US companies lessens the likelihood of facing significant trade repercussions. Further, the threat itself is framed as a potential negotiating tactic, aiming to incentivize India to grant improved market access to US goods and services. This interpretation implies that the actual implementation of tariffs on Indian goods is less likely than the use of the threat as leverage in trade negotiations.
India's 2025 budget demonstrates a calculated approach to trade policy. The strategic reduction of import duties on certain goods, including high-end motorcycles (such as Harley-Davidson), signals a willingness to engage in trade liberalization. This move, coupled with Finance Secretary Tuhin Kanta Pandey's assertion that India's policies are not protectionist, reinforces the image of a country open to trade while also protecting domestic interests. However, the article also notes that India's average tariff rates remain high compared to other developed nations like the US, Japan, and China. While specific tariff cuts have been made, surcharges and other duties maintain a relatively high overall tariff structure. This reveals a nuanced approach where India aims to balance its commitment to global trade with the protection of its domestic industries, particularly in agriculture and small-scale manufacturing. This careful balance is key to understanding India’s trade policy and its response to the US.
Beyond economic strategy, the strong diplomatic relationship between India and the US played a crucial role in mitigating trade tensions. Despite Trump's aggressive tariff policies, the broader strategic partnership between the two nations remained largely intact. Regular communication between Prime Minister Narendra Modi and President Trump emphasized the shared strategic objectives in areas such as defence, technology, and security. The proactive engagement of India's Ministry of External Affairs in addressing US concerns, particularly regarding undocumented Indian nationals, further underscores the efforts to maintain a positive bilateral relationship. The absence of substantial trade-related disputes raised directly by the US with India in recent years points to the strength of this relationship and its ability to withstand trade pressures. Moreover, India's exclusion from Trump's broader tariff threats against BRICS nations highlights the unique position India holds in US foreign policy, underpinned by mutual trust and shared strategic interests. The high volume of bilateral trade between India and the US, reaching $190 billion in 2023, further strengthens this relationship and provides a buffer against any immediate tariff concerns.
In conclusion, while Trump's tariff threats loomed over many nations, India managed to avoid significant direct impacts. This can be attributed to a strategic combination of factors. Firstly, the nature of India's exports limited direct competition with US industries. Secondly, India employed a calibrated approach to trade policy, balancing tariff reductions with the protection of domestic industries. Finally, the strong diplomatic relationship between India and the US helped to navigate the turbulent waters of global trade tensions. While the threat of tariffs remains a potential tool in future trade negotiations, the overall impact on India remained minimal, especially given the ongoing US-China trade war which diverted much of the US administration’s attention and resources. The resilience of the India-US relationship amidst these global trade dynamics serves as a significant case study in international trade relations and highlights the importance of diplomatic engagement alongside strategic economic policy.
Source: Is India really immune to Trump’s tariff threats? A look at India’s strategic response