Greenvissage explains, What does the Global Tariff War mean for India?
Global trade is once again on edge. This time, it’s not because of a pandemic, a war, or a supply chain failure. It’s because of tariffs. Or more precisely—reciprocal tariffs. With Donald Trump back in power, the US administration has revived a key theme from his earlier term – using tariffs as a tool to force trade fairness. In his words, if a country places high tariffs on American goods, the US will do the same in return. And now, that principle may be formalised into action. April 2, dubbed Liberation Day by Donald Trump, marks the day these new reciprocal tariffs were supposed to take effect. And India? It’s very much in the firing line.
India has some of the highest average tariff rates in the world—especially on agricultural products. These rates are a legacy of our protectionist past, but they’ve long been a point of friction with global trade partners, particularly the United States. At the same time, the US remains India’s most important export market, accounting for over one-sixth of our goods exports, valued at roughly USD 78.5 billion annually. If the US decides to go tit-for-tat, the implications for Indian exporters could be significant—particularly for sectors like textiles, pharmaceuticals, automobiles, and electronics. But the uncertainty doesn’t end with direct exports. Tariffs can ripple through supply chains, investor sentiment, and even currency movements.
India hasn’t been passive. Over the last few months, the government has made a concerted push to ease tensions. Prime Minister Narendra Modi’s visit to Washington earlier this year was part of a broader diplomatic effort to pre-empt a tariff fallout. During the visit and in the weeks that followed, India made several key concessions – Tariff cuts on high-profile American exports such as heavy motorcycles, luxury goods, and even bourbon whiskey. Elimination of a controversial 6% digital ad tax on foreign digital platforms. Market access offers on products like almonds and cranberries, two items that frequently feature in US trade complaints. These measures were meant to demonstrate goodwill—and a willingness to compromise. India also signalled its intent to work toward a new bilateral trade agreement, with early drafts expected later this year. However, despite the gestures, Washington has shown little indication that India will be spared. A recent report from the US Trade Representative criticised India’s trade policies once again, particularly around agricultural protectionism. Even the White House Press Secretary pointed to India’s unfair trade practices.
Nothing is certain. But here are three potential scenarios analysts are contemplating. The most straightforward outcome is that reciprocal tariffs are implemented and Indian exports are hit. The extent and coverage remain unclear—whether the US will impose blanket tariffs or target specific sectors—but the immediate impact could be disruption, rising costs, and loss of competitiveness for Indian exporters. A more constructive outcome would see tariffs imposed temporarily but then rolled back after both countries fast-track a broader trade deal. This scenario hinges on whether negotiators can channel the pressure into concrete progress on structural trade issues. In this scenario, the tariffs amount to little more than posturing. Trump has reversed or softened tariff policies before. There’s a slim chance that India gets excluded from the harshest measures or that the new rules prove symbolic more than substantive. But let’s be honest—this isn’t the likeliest bet.
While the spotlight is on India, the broader implications of US tariff escalation are global. If America pursues wide-scale reciprocal tariffs, other countries may retaliate. China, Canada, the EU—all have done so in the past. That could trigger a new wave of trade disruptions, currency movements, and inflationary pressure. Even the US itself isn’t immune. American manufacturers that rely on imported components may face cost pressures. Consumers could see prices rise. And if inflation picks up again, the US Federal Reserve might be forced to keep interest rates higher for longer—potentially tipping the economy into recession. Goldman Sachs recently pegged the likelihood of a US recession this year at 35%.
References:
- National Law Review – President Trump Announces “Reciprocal” Tariffs Beginning 5 April 2025
- Economic Times – India, US holding very active and intense discussions on trade: Jaishankar
- NDTV – US Says India Is Front In Trade Negotiations
- New Indian Express – India-US agree to start negotiations on reciprocal tariff: Foreign Secretary
- Financial Express – Modi-Trump trade deal can be reached in 90 days as reciprocal tariffs put on hold
- Image by Freepik
