The United States’ latest tariff move has sparked widespread debate, with concerns over its impact on global trade. However, beyond the initial shockwaves, this policy could open new avenues for India’s economy. The 26% “discounted reciprocal tariff” on Indian goods, as announced by former US President Donald Trump, presents challenges but also potential advantages that India can strategically leverage.
A Silver Lining for India’s Trade
Chief Economist Pankaj Jaiswal, speaking to Marksmen Daily, outlined several ways in which the tariff policy could work in India’s favour:
Enhanced Competitiveness in the US Market – Despite the tariffs, Indian products could still be more competitively priced compared to other countries facing even steeper duties.
Lower Tariffs Compared to Key Competitors – India’s tariff exposure is significantly lower than that of China and the European Union, making Indian exports relatively more attractive.
New Trade Partnerships with Europe – As European countries reassess their trade policies in response to US tariffs, India has an opportunity to establish stronger economic ties with the EU.
Diversification into European Markets – The policy shift could encourage Indian businesses to expand exports to Europe, reducing dependence on the US market.
China’s Loss, India’s Gain – With Chinese products dominating the US market and facing higher tariffs, Indian exporters could step in as viable alternatives.
Understanding the US Tariff Strategy
Trump’s tariff policy aims to counter what he perceives as unfair trade practices by imposing duties on imports from countries that levy higher tariffs on US goods. For instance, India imposes a 70% tariff on motorcycles, while the US charges only 2.4% on similar imports. The “reciprocal tariff” approach is designed to balance such disparities.
India’s exposure to these tariffs is notable, but still lower than China’s (34%) and the EU’s (20%). The move is part of a broader US strategy to restructure trade relationships by discouraging protectionist policies worldwide.
Potential Impact on Indian Exports
At first glance, the tariffs may seem like a challenge for India’s export sectors, especially considering that the country’s merchandise exports to the US reached $74 billion in 2024. However, key Indian industries might not be severely impacted:
Agriculture and Seafood – According to agricultural economist Ashok Gulati, Indian seafood and rice exports are less vulnerable than those from competitors like Vietnam and Thailand.
Pharmaceuticals – India’s pharmaceutical sector remains largely unaffected, retaining its stronghold in the US market. The industry’s $8 billion exports to the US will likely continue without significant disruptions.
Gems and Textiles – While there may be some initial pricing challenges, Indian exporters can adjust strategies to remain competitive.
Resilience and Long-Term Growth Prospects
While the short-term implications of tariffs may create turbulence, India’s economy is well-positioned to absorb the impact. Unlike Vietnam and other export-heavy nations, India’s exports to the US account for only 2.2% of its GDP. This relatively low dependency on US trade means India is less susceptible to economic shocks from the tariff hike.
Additionally, India’s government is actively promoting domestic manufacturing through initiatives like Make in India and the Production Linked Incentive (PLI) scheme. These efforts will strengthen India’s position in global supply chains and reduce reliance on tariff-sensitive markets.
Analysts from Goldman Sachs and Fitch Ratings note that India’s broader economic strategy—focused on increasing internal demand and diversifying export markets—provides a safety net against sudden global trade shifts.
India’s Strategic Response
Recognizing the need for proactive measures, the Indian government is working closely with exporters to mitigate the impact of tariffs. Key strategies include:
Negotiating Trade Agreements – India is pushing for a long-term trade deal with the US to boost bilateral trade from $190 billion to $500 billion by 2030.
Strengthening Global Supply Chain Participation – India is integrating into global supply networks in sectors like semiconductors, defence, and renewable energy.
Encouraging Domestic Manufacturing – With support from government policies, Indian industries are gradually reducing dependency on imports, improving their self-sufficiency.
Marksmen View
Trump’s tariffs create short-term trade hurdles, but India’s diversified economy and strategic policies ensure resilience. With minimal dependence on US exports and a focus on new markets, India is poised for growth. As global trade evolves, India can enhance its global presence, turning this challenge into an opportunity for businesses to expand, innovate, and strengthen competitiveness in emerging international markets.
