Trump’s Tariffs: A New Test for India’s Trade Strategy

By Soumitri Das | Founder & CEO, Propcore

The return of tariff talk to the centre of global discourse—courtesy of US President Donald Trump’s latest proposal for sweeping reciprocal tariffs—signals a profound moment for global trade. For India, it isn’t just a trade issue. It’s a litmus test of strategy, resilience, and long-term vision.

During his 'Liberation Day' speech, President Trump unveiled a striking chart:

The message was blunt: “The US has been looted. The days of one-sided trade are over.”

This rhetoric is familiar, but the context is different. We are in the middle of a supply chain recalibration, post-pandemic industrial policy restructuring, and renewed geo-economic competition. In this high-stakes environment, India must move from being a passive participant to an active architect of trade strategy.

What Do Trump’s Tariffs Really Mean for India?

India’s proposed 26% tariff isn't the highest—but it’s significant. However, unlike China or Vietnam, India’s pharmaceutical exports remain largely insulated. Furthermore, telecom equipment and textiles—where India already enjoys a 7–19% tariff advantage over China and Vietnam—could stand to benefit if companies shift sourcing to minimise cost.

In short, while the tariff itself stings, the strategic position is more promising than it appears.

But that potential won’t translate into gains without clear, deliberate moves.

Strategic Imperatives for India

India’s response must be swift but calibrated. Consider these three pillars:

1. Deepen Domestic Capabilities

The Production Linked Incentive (PLI) schemes are a great start. But they must now go deeper and wider:

• Expand coverage to include advanced manufacturing, electronic sub-assemblies, and value-added textiles
• Extend scheme duration to align with long investment cycles
• Create customised PLI variants for US-focused exports

2. Simplify Trade Infrastructure

India must walk the talk on logistics and customs:

• Reduce port dwell time
• Resolve GST refund delays for exporters
• Roll out a National Trade Facilitation Dashboard to monitor friction points in real time

3. Engage Diplomatically, But Play Offence

A potential trade deal with the US by late 2025 is on the table. India must go beyond defensive negotiations:

• Offer concessions in low-impact sectors (e.g., luxury motorcycles, premium pork)
• Seek reciprocal advantages in technology, medical devices, and green energy supply chains
• Incentivise US firms to manufacture key components in India—from solar panels to semiconductors

India’s Real Opportunity: Becoming a “Middle Power” of Trade

While countries like Vietnam, Malaysia, and Taiwan face higher GDP exposure to the US, India’s strength lies in its low correlation with existing US-bound export dependencies. That makes it a safe harbour in a stormy trade environment.

This is India’s chance to position itself as a dependable middle power in the new global value chain:

• Not as China’s replacement, but as a trusted parallel
• Not through protectionism, but through predictable policy and performance-driven incentives

What’s at Stake if We Get It Wrong?

According to Aston University’s modelling, retaliatory tariffs could shrink global income by $1.4 trillion. That’s not just theory—it’s the real risk of supply chain paralysis, investor pullback, and inflation volatility.

As Morgan Stanley notes, the indirect effects—lost confidence, capex hesitation, and volatile capital flows—may hurt more than tariffs themselves.

India, in its ambition to reach $500 billion in two-way trade with the US by 2030, cannot afford to let short-term volatility distract from long-term policy clarity.

Final Thought: Beyond Tariffs, Towards Trade Transformation

Tariff wars test more than export strength—they test national strategy.

Will India fall into the reaction trap—or will it lead with clarity, foresight, and action?

This is the moment to move past transactional thinking and adopt a transformational trade policy: one that connects incentives, infrastructure, and international relations into a single, coherent narrative.

India has the tools. What it needs now is strategic ambition backed by execution discipline.

What do you believe should be India’s top priority in responding to Trump's tariff challenge? Let’s shape the conversation together.

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