How India should respond to Trump’s tariff threats – Firstpost

A lot has been talked about April 2, 2025, which is poised to be a defining moment in international trade, the one that US President Donald Trump has been anticipating anxiously. Despite substantial efforts to diminish its impact through multiple channels, India is poised to face sweeping US reciprocal tariffs coming into play on the designated day, sending shockwaves through global trade.

While touted as a strategy to reinvigorate American manufacturing and reduce the trade deficit, its repercussions tend to extend far beyond the US. The ultimate question remains: what should be India’s response? Should we surrender under the US tariff threats, or should we reconcile and emerge stronger? If we look at the history, India’s resilience has been our greatest strength, and this challenge, like many before, can be seen as an opportunity to transform.

Understanding the Impact

Tariffs are simply the economic chains, imposing limits on the free flow of goods and disrupting competitiveness in terms of pricing. For India, many export-heavy sectors, such as IT, pharma & auto components, could directly be impacted initially. An abrupt reciprocal tariff on these important industries could drastically reduce demand from the US, compelling the Indian companies to recalibrate their go-to-market policies. Besides, with the US dollar likely to strengthen going ahead, the Indian rupee may further depreciate, transforming our imports, primarily the oil and gas, heavier on the pocket.

Investor outlook could be another victim of this on-and-off tariff threat. Foreign Institutional Investors (FIIs) are volatile to such global trade uncertainties and may react instinctively. Yet, while these immediate aftershocks may upset the traders, seasoned investors realise that markets prosper on long-term fundamentals rather than ephemeral disruptions. “Every cloud has a silver lining,” and the answer lies in navigating the storm rather than surrendering to it.

India’s Response in Hand

Now, it’s time for India to respond to these tariff threats with a blend of resolve and strategic manoeuvring. One perspective is to significantly utilise its exponentially growing domestic market, an essential component of economic growth. Ever since 2014, India has been on the ever-growing path to the “Atmanirbhar Bharat” (self-reliance India) under Prime Minister Narendra Modi’s leadership, significantly encouraging domestic manufacturing and diminishing external dependence so far.

Moreover, India must also stand bold and respond to this move by giving the right message boldly, that we are not afraid. India could also impose strategic tariffs on many segments, like the agricultural imports from the US, which constitute a significant portion of their exports to India. Diplomacy is definitely an indispensable tool to negotiate with the US government and key trade officials, and lobbying through economic forums could compensate a little. After all, trade is a two-way road, and India’s huge consumer market is equally critical for US companies.

Diversification could be the Key

India must expedite its economic diversification beyond the US, leveraging untapped opportunities in the EU, ASEAN, the African continent, and the Middle East to offset trade challenges. The present FTAs and ongoing negotiations with the UK, EU & a few more provide a strong pillar for resilience. Amplifying these partnerships could reduce market reliance, while India’s vast consumer market and promotion of ‘Made in India’ products and services can drive Atmanirbharata in an uncertain global economy.

China’s playbook offers valuable insights in this case. When faced with trade restrictions from the US, China aggressively expanded its trade footprint in Latin America, Africa & Europe, etc. As per one of the old sayings, “Don’t put all your eggs in one basket.” It is imperative that India reinforce its trade portfolio and slash vulnerability to unpredictable global trade policies.

What Government must Mull

The current government under PM Modi has firmly advanced India’s economic aspiration by bolstering trade & exports through massive infrastructure development, huge digital transformation & pro-business reforms. While India remains committed to impartial and open trade, it must design a steadfast yet pragmatic response to the US tariffs imposed by the Trump administration. Instead of reacting quickly or making unilateral adjustments, India’s stand should be crystal clear that trade relations must be built on mutual benefits & respect and strategic interests, not just on one-sided demands.

History shows that merely accommodating US demands, that too especially under the Trump administration, without clear reciprocity is often misinterpreted as weakness. India’s measured response to his tariff threats and undue comments has so far been calm, but restraint alone is not always strategic. While multiple nations have countered Trump’s tariff threats aggressively, India must develop and present a response that is neither reactionary nor submissive, one that asserts India’s economic interests without being drawn into Trump’s unpredictable rhetoric.

Turning a Setback into an Opportunity

Rather than viewing these US tariffs as existential roadblocks, India should see them as a catalyst to reinforce its economic sovereignty and global trade standing. By deepening industrial perseverance, expanding trade partnerships beyond conventional nations, diversifying trade possibilities, and exercising firm diplomacy, India has the right kind of ability and the leadership to turn this disruption into a defining moment of strength and resilience. The global order is continuously evolving, and India stands at a crossroads, not to yield to external pressures but to carve its own economic route. The challenge has arrived, but India must be ready, not with hesitation, but with clarity, strategy, and the confidence of “Atmanirbhar Bharat”!

Amarjeet Verma is a writer and policy researcher. He addresses contemporary issues spanning people, policy and politics. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.