Dr Vijay Sagar Dheman
The United States has declared a 25% tariff on Indian goods, effective from August 1, 2025, alongside an unspecified “penalty” associated with India’s energy and military procurements from Russia and Iran. This measure originates from U.S. President Trump’s dissatisfaction with the progress of trade negotiations with India. It is a strategic pressure measure to attain a more advantageous trade agreement. The Indian Ministry of Commerce and Industry is presently examining the implications of this development, while reaffirming its dedication to establishing a fair-trade accord that safeguards Indian interests.
The tariffs are anticipated to markedly influence India’s labour-intensive industries, including apparel, pharmaceuticals, gems and jewellery, and petrochemical products. Industry experts have expressed particular concerns regarding marine products, notably shrimps, which could potentially advantage competitors such as Ecuador. While some forewarn of a decline in demand for Indian exports, others are of the opinion that India may maintain a competitive advantage over nations subjected to higher tariffs.
Historically, the United States has served as a significant trading partner for India, with India consistently maintaining a substantial trade surplus. Long-standing disputes have primarily focused on India’s elevated tariffs and protectionist policies, particularly within the agriculture and dairy sectors. From the United States’ perspective, the implementation of the new tariffs could result in a 1.8% increase in consumer prices and potentially impede the growth of the United States’ real Gross Domestic Product (GDP). Nevertheless, these measures would impact approximately 70% of the Indian farmers engaged in this sector, whom Indian negotiators have attentively represented. And they have sternly refused to concede to the demands of the United States.
Despite the tariffs, trade negotiations are scheduled to persist, with a United States delegation expected to return to New Delhi in late August. Indian officials remain optimistic about a temporary imposition, foreseeing the possibility of a comprehensive trade agreement at a later date. India’s Gross Domestic Product (GDP) magnitude and competitive capabilities are regarded as the “most significant deterrents” against such unilateral measures by any nation globally, including the United States. This stance underscores India’s dedication to safeguarding its national interests, particularly within the agriculture and dairy sectors, in alignment with its policy of “Strategic Autonomy.”
The United States may eventually yield to India owing to a multitude of factors. Firstly, economic interdependence is paramount; India constitutes a significant market and investment destination for American enterprises. Disrupting this relationship, such as by impairing Indian generic drug exports, would adversely affect American businesses and consumers. Secondly, their strategic alliance in countering China’s influence within the Indo-Pacific region is crucial, and any trade friction could undermine this broader coordination. Additionally, pressure from American businesses reliant on Indian supply chains will advocate for a resolution. Lastly, India’s resilience through market diversification and domestic manufacturing diminishes the effectiveness of United States coercive tactics, and the geopolitical necessity of maintaining India as a robust democratic partner in Asia implies that alienation from India could foster closer ties with alternative blocs.
Regarding the United States’ engagement with Pakistan, President Trump’s agreements concerning oil and cryptocurrency reflect the strategic interests of the United States in the region, including the efforts to counter Iran and China’s expanding influence. These measures also function as a subtle geopolitical balancing strategy aimed at exerting influence over India’s energy policies. In response, India strengthens its economy and domestic markets, establishing itself as a vital global partner. Furthermore, India actively enhances its alliances with other nations and coalitions such as the United Kingdom, the European Union, the Global South, and the Latin America and the Caribbean (LAC) bloc, thereby diversifying its trade partnerships. India also maintains a firm stance on direct bilateral engagement with Pakistan, rejecting third-party mediation, and employs non-military instruments such as the Indus Waters Treaty to assert its position. This “First India” approach emphasises national interests and reinforces its strategic autonomy.
Ultimately, this situation is not a diplomatic failure but a manifestation of India’s strategic autonomy. The common man, mainly the opposition parties, must understand that India’s economy demonstrates remarkable resilience, driven by its vast domestic market, demographic dividend, and technological prowess. Its diversified foreign policy and ongoing domestic reforms position it to transform minor setbacks into catalysts for growth, emerging even more powerful and influential on the global stage.
(The author , a Brigadier, is an International Affairs Expert)
