The VIF held a discussion on "Navigating Trump's 2025 Tariffs on India" on 16 April 2025. After Opening Remarks by Dr Arvind Gupta, Director VIF, there were two initial presentations by Dr Rajiv Kumar, Former Vice Chairman, NITI Aayog and Mr Sanjay Chadha, former Additional Secretary at the Ministry of Commerce. The floor was then opened to interventions from all attending participants. The meeting extensively discussed the implications of the Trump’s liberation day tariffs on India’s trade strategy, and the challenges and opportunities presented by the shifting global economic and geopolitical landscape. Some of the salient points made were:

Return of US Protectionism

The Trump tariffs were framed as part of a broader geopolitical realignment—the tariffs were seen not only as a trade strategy but as a reflection of the US's broader economic struggles. Trump’s tariff strategy was compared to earlier era of historical protectionist measures, notably the Smoot-Hawley Tariff of the 1930s, which some argued contributed to economic instability and global conflicts. The meeting emphasized that the US is moving from an engagement approach to a containment stance in its relations with China, which has broader implications for global trade dynamics. India must now adjust its approach in response to this protectionist shift, balancing its engagement with both the US and China while seeking to protect its own economic interests.

Impact on India-US Trade Relations

The tariffs have complicated US-India trade dynamics, particularly in sectors such as electronics, auto components, iron and steel, and diamonds. India’s trade with the US remains significant but does not exert enough influence to meaningfully affect the US trade deficit. However, the imposition of tariffs presents substantial barriers to the expansion of trade, making it clear that India must reassess its reliance on the US as a key trading partner. Additionally, India’s internal trade policies and bans on certain imports, have added complexity to diplomatic negotiations with the US, as it becomes difficult to balance domestic protections with the demands of international trade agreements.

Sector-Specific Trade Impact

It was noted that specific sectors within India’s economy will be disproportionately affected by the tariffs. Notably, the electronics, auto components, and iron and steel sectors were expected to face the most significant disruptions. However, some sectors, such as textiles and pharmaceuticals, may be less impacted by these changes. India’s shrimp export industry, a key market segment, was also assessed as likely to see a reduction in exports to the US. The discussions stressed the importance of analysing the sectoral impacts and tailoring India’s export strategies accordingly. By focusing on these vulnerabilities, India can strategically expand into alternative markets that are less affected by the shifting tariff regime.

Opportunities for India Amid US-China Tensions

Despite the challenges, there was a growing sense that India has a significant opportunity to position itself as a key player in global trade. The trade tensions between the US and China present a unique opening for India to strengthen its economic presence in markets outside of these two major players. Expanding India’s share in global trade was emphasized as critical for future economic growth. To do so, the government was encouraged to reassess its export promotion strategies, moving away from a one-size-fits-all model and focusing more on localized, sector-specific policies that align with global trade trends.

Further, by improving its business environment and pushing for key reforms, particularly in manufacturing and agriculture, India can position itself as an attractive alternative for global capital. The discussions emphasized that India’s industrial, investment, and agricultural strategies must be revamped to align with the new global economic realities.

Strategic Need for Diversification

One of the most pressing points discussed was India’s need to move beyond its current reliance on the US and China as its primary trade partners. It was urged for India to diversify its trade relationships, especially with regions like the European Union and the Global South, in order to safeguard its economic interests and expand its presence in the global marketplace. The tariffs were seen as a wake-up call, signalling that India must think beyond the traditional trade paradigms and explore new avenues for growth.

Future Pathways for Indian Trade

The meeting underscored the importance of strategically navigating the shifting global trade landscape. India’s diversification strategy must consider not just the US and China but also emerging markets in Europe, Africa, and the Global South. Key sectors, such as manufacturing, agriculture, and automobiles, must be prioritized to ensure India remains competitive on the world stage. The meeting also suggested expediting bilateral trade agreements already in discussion.

In conclusion, the meeting reinforced the need for India to remain strategically agile in the face of shifting global trade dynamics. While the US-China tensions create uncertainty, they also present opportunities for India to redefine its position in the global economic order. By diversifying trade partnerships, strengthening multilateral ties, and pursuing targeted reforms, India can chart a course for sustained economic growth and global influence.