WEATHERING TRUMP TARIFFS

To mitigate the impact of US restrictions, Indian policymakers must pursue a dual strategy comprising stimulative macroeconomic policies and a concerted effort to deepen trade ties with the EU, China, and the Middle East

- Shang-Jin Wei

India has long benefited from geopolitical arbitrage, maintaining working relationships with Russia, the United States, and Europe. But this delicate balancing act is now being tested by a series of policy shocks delivered by US President Donald Trump's administration. These disruptions, unlikely to ease anytime soon, raise a critical question: Can India retain its status as the world’s fastest-growing major economy?

The most urgent challenge facing Indian policymakers is weathering the escalating trade war. In August, Trump imposed a 50 per cent tariff on Indian imports, citing the need to reduce India’s trade surplus with the US and punish the country for its massive purchases of Russian oil. Adding to the pressure, Trump has urged the European Union and other G7 countries to take even harsher steps — namely, to impose a 100 per cent tariff on imports from India and China.