Trump's Tariff Gambit: How India Can Navigate the New Trade Storm
The coming months will test whether India can turn this trade crisis into an opportunity for much-needed domestic reform while preserving its crucial economic relationship with the United States.
The recent announcement of steep new tariffs by US president Donald Trump has India's export community worried, with duties of up to 27% being slapped on key Indian goods. As New Delhi prepares to negotiate with the US administration, three industry experts who spoke to The Core Report warned of turbulent times ahead while suggesting potential pathways to minimise the damage.
Arbitrary Numbers, Real Consequences
Trade policy analyst Ajay Srivastava minced no words in his assessment. "The first thing that hit me was that 27%, he says it's 54%. India charges 54% equivalent to tariffs and other barriers on US goods. When we calculated, its less than 8%. So this figure is totally out of the hat, there is no justification,” said Srivastava speaking to The Core. This miscalculation, now resulting in 27% tariffs on Indian exports, creates what Srivastava called the biggest worry in the minds of investors, with complete uncertainty about future tariff levels.
The impact will be felt across sectors from apparel to engineering goods, with the new tariffs stacking on top of existing duties. "For example, shirts already face 12-18% tariffs and shoes 30% or more. These 25% will be over and above existing tariffs," Srivastava explained. The only silver lining is that competitors like Bangladesh (37%) and China (54%) face even higher rates, creating what he calls a "relative disadvantage" that Indian exporters might exploit — if they can stomach the volatility.”
Pharma's Temporary Shelter
One sector breathing easier is pharmaceuticals, which escaped the new tariffs. Dr. Viranchi Shah of the Indian Pharmaceutical Alliance highlighted why: "One of the statistics that I'm aware of is of a US company also having plants in India. Their cost of converting a thousand units, let's say thousand tablets in India is close to four and a half, five dollars while doing the same thing in the US is in excess of thirty dollars.”
This massive cost differential, plus the three to five year timeline to establish new FDA-approved facilities, makes reshoring impractical for now.
However, Dr. Shah warned against complacency and said, "I think they would try to address high value innovative drugs to be brought to the US first, then they would try to actually go into generics.”
With the US accounting for 32% of India's pharma exports ($9 billion), the industry is exploring contingencies, including setting up more US facilities while maintaining its cost edge at home.
Negotiation Minefield Ahead
As India prepares for tough talks, experts identified several pressure points. Columnist and author Shankkar Aiyar noted the US will likely demand concessions beyond tariffs. "They want us to open our agriculture, They want to dilute whatever is remaining of the digital laws,” said Aiyar. Agriculture appears to be a red line for India, with Srivastava citing cultural sensitivities around dairy imports as emblematic of the divide.
Potential bargaining chips include — offering better access for US tech firms in India's digital market, reducing duties on select US products like Harley-Davidsons and accelerating defense procurement from American manufacturers.
The Self-Reliance Imperative
All panelists agreed India must address domestic inefficiencies to weather the storm. Srivastava listed over 100 needed reforms, from GST simplification to reducing quality control order bottlenecks.
As negotiations loom, India faces a delicate balancing act — protecting its export interests without conceding on core issues like agriculture. With the US economy unlikely to absorb sustained price hikes from these tariffs ("Newton's law will play out," predicts Aiyar), New Delhi may have more leverage than it appears. But as Srivastava concluded, the ultimate solution lies at home. "If we make good products at the right price, someone will buy them - if not the US, then others," he said.
The coming months will test whether India can turn this trade crisis into an opportunity for much-needed domestic reform while preserving its crucial economic relationship with the United States. For now, businesses are advised to buckle up for a turbulent ride.
Note: This story was curated using an artificial intelligence tool. The text has been edited to ensure factual accuracy and verbatim quotes.
