India must explore new markets, improve quality and rebuild ties with China
Nations do not have permanent friends, only permanent interests —a reality clearly reflected in Trump’s tariffs. On April 2, US President Donald Trump announced the implementation of a 26 per cent reciprocal tariff on Indian imports, effective April 9. This move aims to counterbalance what the US administration perceives as unfair trade practices, specifically pointing to India’s higher tariffs on American goods. The imposition of these tariffs is poised to significantly impact India’s economy, particularly its export sectors. Companies such as Tata Motors, which export vehicles to the US, may experience reduced competitiveness due to increased costs. Although pharmaceuticals are exempt from the 26 per cent tariff, broader trade tensions could still affect this sector indirectly. Analysts estimate that these tariffs could cost India approximately USD seven billion annually, with significant revenue losses across industries such as chemicals, metal products, jewellery, automobiles, pharmaceuticals and food products.
Indeed, it is a challenging situation for India, as New Delhi has limited options to counter the US decision. The only way to address this issue is through negotiations and diplomacy, though there is no guarantee of success. However, given Prime Minister Narendra Modi’s strong rapport with Donald Trump, a resolution could be reached over time by offering some tariff concessions on US imports. The real challenge is not just India’s ability to lower tariffs, but also the risk of exposing domestic industries to competition from American giants, which could prove devastating for many Indian companies and entire sectors.
India could also consider approaching the World Trade Organisation (WTO) to challenge the tariffs if they are deemed to violate international trade agreements. However, this legal avenue may be time-consuming and requires substantial evidence, though it remains a viable option.
It is also time to improve the quality of Indian products and explore untapped markets. India could invest in enhancing the quality and cost-effectiveness of its products to maintain competitiveness despite higher tariffs. This could involve adopting advanced technologies, improving supply chain efficiencies and fostering innovation. The most effective strategy at this point is to reduce dependence on the US market. By diversifying trade and strengthening relationships with other countries, India can safeguard its industries from the impact of these tariffs.
This would involve identifying alternative markets for key exports. Given that several other nations, including China, are also facing similar trade barriers under Trump’s policies, forming an alliance of affected countries to boost trade among themselves could be a viable solution. Such an approach would create a mutually beneficial scenario, helping all parties mitigate the impact of US-imposed tariffs. It would be a win-win situation for all and could even jolt the US, as it would lose ground in global trade. Moreover, this situation could be a blessing in disguise for India’s diplomatic relations.
By prioritising trade with the US, India may have strained its relations with China. Now, both countries are facing challenges under US trade policies. It is time for pragmatism to prevail, India should consider mending fences with China and moving forward. This century belongs to Asia, and it makes little sense to antagonise China merely to align with US interests, which primarily seek to maintain its global dominance. There is also a distinct change in China’s attitude towards India, with President Xi Jinping extending a friendly hand. India should seize this opportunity to strengthen bilateral ties. While, the 26 per cent reciprocal tariff imposed by the US presents a significant challenge to India, this is the time to think outside the box and turn this ‘aapda’ (crisis) into ‘avsar’ (opportunity).
