Trade relations between India and the United States have seen several ups and downs over the years. However, the past few weeks after President Trump has taken charge, it is anyone’s guess to know whether the relation is going up or down, and the steering, speed and direction is controlled by POTUS. The one factor in favor of India is the warmth of the relationship between POTUS and PMOI.

While both nations are key strategic partners, economic priorities and domestic interests often lead to policy shifts—including the imposition of tariffs. If the U.S. decides to introduce or increase tariffs on Indian exports, India will have to respond with a multi-pronged strategy to protect its interests and maintain economic stability.

Let us review the options available on hand:

1. Diplomatic Engagement:

India is likely to initiate diplomatic discussions to resolve the issue through peaceful negotiation. Historically, both countries have managed trade differences via high-level dialogues and trade talks. The Indian government will likely engage with U.S. trade representatives to understand the reasons behind the tariffs and seek a mutually acceptable solution. Maintaining a strong bilateral relationship will remain a top priority.

2. Possible Retaliatory Measures:

If negotiations do not yield positive results, India could consider imposing reciprocal tariffs on select U.S. imports. This response would aim to send a clear message without causing major economic disruption. In 2019, India implemented such a move after the U.S. withdrew its Generalized System of Preferences (GSP) benefits. Any retaliatory action would likely target sectors where India has leverage without harming its own economy. However, the big question is whether India has the stature / authority / strength to take on the US action.

3. Diversification of Trade Partners:

In response to reduced access to the U.S. market, India may look to diversify its export destinations. Strengthening trade relationships with the European Union, Southeast Asia, Africa, and Latin America could reduce dependency on the U.S. India is already pursuing or negotiating several free trade agreements (FTAs) that could help offset the impact of U.S. tariffs. A shift toward multi- lateralism in trade can provide a buffer against future economic shocks.

4. Strengthening Domestic Manufacturing:

Tariffs could also serve as a catalyst for India to strengthen its domestic manufacturing capabilities. Programs like “Make in India” and “Atmanirbhar Bharat” would receive further impetus as the country seeks to become more self-reliant. The Production Linked Incentive (PLI) schemes and infrastructure investments can help local industries become more competitive, both domestically and internationally.

5. Legal Action Through WTO:

India may also consider approaching the World Trade Organization (WTO) if it believes the U.S. tariffs are unjust or in violation of trade agreements. While this legal route is time-consuming, it reinforces India's commitment to a rules-based global trading system and can add pressure on the U.S. to reconsider its stance. In any case, WTO and its parent UNO is largely dependent on the largesse of the US and have (over the years) become, sort of, toothless with the ability only to grandstand. It will be a foolish move to go to WTO or take the legal route. 

6. Promoting Innovation and Export Competitiveness:

Beyond reactive steps, India could use this situation to re-evaluate and innovate its export strategy. By focusing on high-value sectors like pharmaceuticals, IT services, green energy, and digital trade, India can increase its export competitiveness and reduce vulnerability to tariff-based disruptions.

This seems to be, by far, an optimal option – build the fire of Atmanirbhar and Make In India so big that it is able to drive all such pressures of tariff or sanctions. India has lagged only because of the huge cultural backlog left behind (and ingrained into our psyche) by the colonial yoke. There is a young India chafing to break free from regressive thinking and the government should recognize this change and provide opportunity. 

By – IBedit 

(a 70/30 AI editor where 70 is automated and 30 is the manual work)

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Related Read: Trump's Tariffs and Their Impact on India: A Business Perspective