Getting around Trump

India must respond with diplomacy, market diversification and urgent domestic reforms to counter the US tariff hikes

- BY RAHUL AHLUWALIA & YUVRAJ KHETAN

Donald Trump's tariff war against the world began in March.

India’s response had, until now, demonstrated commendable maturity and strategic restraint. Instead of resorting to retaliatory tariffs, Indian policymakers adopted a targeted set of measures: reducing duties selectively on key American imports—most notably whiskey and motorcycles—while facilitating increased US imports in strategically significant sectors such as energy and defence. Reports suggested that a deal was close to being signed. This measured approach underscored India’s commitment to trade stability.

Then Trump hiked tariff for India to 50 per cent (to be effective on August 27), which he justified by citing India’s sizeable trade surplus with the US and its continued purchases of Russian oil. Since other countries with larger surplus and greater Russian purchase are currently facing lower tariffs than India, commentators point to India’s unwillingness to compromise on agriculture and dairy market access, or diplomatic clashes over the India-Pakistan ceasefire, as more probable causes. Whatever the true reason, the announcement threatens to disrupt India’s access to the world’s largest economy and its biggest export destination—worth about $90 billion a year. The economic repercussions are worrying, as labour-intensive sectors such as gems and jewellery, garments and machinery will be hit hard if the tariffs come into force.