By Dipak Kurmi
The sudden decision by former United States President Donald Trump to slap an unprecedented fifty per cent tariff on Indian goods has triggered a storm in the global trading system, with ramifications that stretch well beyond the realm of economics. The tariff, ostensibly aimed at punishing New Delhi for its continued purchases of Russian oil and arms, amounts to an effective embargo on key Indian exports such as textiles, leather, auto components, gems and jewellery, and shrimp. American importers and consumers, who can at best absorb fifteen per cent of the increased costs, and Indian exporters, who can endure only around five per cent before trade becomes unviable, find themselves staring at the collapse of long-established supply chains.
While pharmaceuticals and electronics have been spared for now, the message is clear: the United States is willing to weaponise trade even against a strategic partner of twenty-five years’ standing. India’s restrained response—choosing not to retaliate immediately—has been deliberate, underscoring New Delhi’s determination not to escalate the situation. Yet, the fact remains that Trump, together with his trade advisor Peter Navarro and Treasury Secretary Scott Bessent, has chosen to single out India while turning a blind eye to China and the European Union, both of whom import far larger volumes of Russian energy.
The move has been controversial in the United States itself. Economists such as Robert Wolff have criticised it as self-defeating, arguing that antagonising the world’s most populous nation is equivalent to firing a bullet into one’s own foot. Others, like Jeffery Such, have noted that Washington’s discomfort with India stems from its rapid growth, and have even suggested that New Delhi consider tilting closer to Beijing in response. Democrats in Congress have mounted a legal challenge, and the Federal Appeals Court recently ruled that the President lacks the authority to impose such sweeping tariffs on foreign imports. However, implementation of that ruling has been delayed until mid-October to allow the administration to appeal to the Supreme Court. Until then, the tariffs remain in effect.
This legal wrangling raises uncomfortable questions about the independence of the American judiciary. With Republican-appointed judges outnumbering their Democratic counterparts, Trump and Navarro have expressed confidence that the Supreme Court will uphold the tariffs. Should that fail, they have hinted at seeking Congressional ratification. For many in India and abroad, this spectacle undermines Washington’s claims to be the oldest and greatest democracy, highlighting instead the fragility of institutional checks and balances when confronted with raw political will.
For India, the fallout is immediate and severe. The labour-intensive sectors targeted by the tariffs face not only declining orders but also the spectre of unemployment for millions of workers. Finance Minister Nirmala Sitharaman has urged producers not to lay off employees or scale down production, but her call may prove difficult to sustain without alternative markets. The government has moved to soften the blow through reforms, including a proposal to simplify the Goods and Services Tax into just two slabs of five and eighteen per cent. This would provide relief to micro, small, and medium enterprises (MSMEs), helping them cut production costs. Simultaneously, talk of labour reform—covering wages, social security, occupational safety, and industrial relations—remains politically sensitive. Fearful of backlash, the government has delayed the implementation of the four labour codes, even as industries increasingly replace labour with technology and demand more flexible hire-and-fire laws. Contractual hiring, especially in work linked to corporate social responsibility funding, has already become the norm.
At the strategic level, India is moving swiftly to diversify its export portfolio. As many as forty countries in Latin America, Africa, and Southeast Asia have been approached, while outreach to the United Kingdom, Japan, and South Korea is being intensified. The Export Promotion Council has been tasked with ensuring that Indian suppliers are linked to global buyers with an emphasis on quality, sustainability, and innovation. Russia and China, with whom India runs large trade deficits—sixty billion dollars with Moscow and ninety-nine billion dollars with Beijing—have signalled their willingness to open their markets wider to Indian goods, partly to offset those imbalances.
The timing of Trump’s tariff coincided with Prime Minister Narendra Modi’s visit to Tianjin for the Shanghai Cooperation Organisation summit. There, in bilateral meetings with Presidents Xi Jinping and Vladimir Putin, Modi underscored India’s commitment to multilateralism and diversification. China responded by lifting bans on exports of fertilisers, rare earth minerals, and bore drilling machines—inputs critical for Indian industries. Still, the government in New Delhi remains cautious. While swadeshi ambitions focus on developing domestic resources for semiconductors and rare earth magnets, India is simultaneously seeking tie-ups with countries such as Australia to avoid excessive dependence on a single supplier.
The SCO summit’s Tianjin Declaration directly opposed unilateral coercive measures, including economic sanctions of the kind Trump has deployed. Member states committed to an open, transparent, and non-discriminatory trading system, pledging special support for developing economies. Terrorism also featured prominently: unlike in June, when the Pahalgaon terror strike of April 22 was ignored, this time the attack was condemned and formally included in the declaration. Yet, India again stood apart by refusing to endorse China’s Belt and Road Initiative, which continues to violate Indian sovereignty through the China-Pakistan Economic Corridor.
Despite signs of warming ties, India’s relationship with China remains fragile. Border tensions have eased since the Kazan summit, with troop disengagement achieved, but neither de-escalation nor full withdrawal has materialised. Moreover, reports from Operation Sindoor suggest that Beijing has passed intelligence to Pakistan, deepening India’s distrust. The Opposition has already accused Modi of failing to raise the issue during his talks with Xi. While trade cooperation may expand, scepticism remains over whether China will truly help bridge the bilateral deficit. With its vast manufacturing capacity, Beijing has little incentive to import from India.
Russia, by contrast, appears more forthcoming. In his meeting with President Putin, Modi reiterated support for peace initiatives in Ukraine while also strengthening cooperation in trade, fertilisers, and security. Both countries reaffirmed their commitment to coordinate positions in multilateral fora such as the UN, BRICS, G20, and SCO. Moscow’s willingness to facilitate more Indian exports is aimed both at balancing bilateral trade and at shoring up ties as Russia becomes increasingly isolated from Western markets.
The broader picture is one of a shifting global order. Trump’s tariffs may be intended to coerce India into alignment with U.S. foreign policy goals, but the effect could be the opposite. By pushing New Delhi to seek new markets, strengthen BRICS engagement, and deepen cooperation with China and Russia, Washington risks alienating a partner it has long sought to cultivate as a counterweight to Beijing. As Wolff noted, the United States may end up weakening its own strategic position.
Meanwhile, ordinary workers and small businesses in India are the ones most exposed to immediate pain. A collapse in American demand could force closures in Tirupur’s garment factories, Surat’s diamond polishing units, or Andhra Pradesh’s shrimp farms. If producers are unable to find new markets quickly, the social consequences could be severe. At the same time, American consumers are unlikely to be spared. Tariffs will drive up prices, reduce choice, and disrupt established supply chains.
The story is still unfolding. Much depends on how the U.S. Supreme Court rules on the legality of the tariffs, whether Congress is willing to intervene, and whether negotiations between Washington and New Delhi can de-escalate the confrontation. India’s determination to remain non-aligned in energy purchases, combined with its proactive diversification drive, shows that it will not be easily coerced. Yet, the crisis underscores a larger truth: in an era of geopolitical rivalry, trade is no longer an economic activity alone. It is a weapon, wielded with consequences that ripple across borders and economies.
For India, the lesson is clear. Diversification of both export markets and import supply chains is not merely an economic strategy but a strategic imperative. No nation can afford to be dependent on a single partner, however friendly. For the United States, the lesson is equally stark: coercion may bring compliance in the short term, but in the long run it erodes trust, undermines institutions, and drives partners into the arms of rivals.
The tariffs may yet be rolled back, but the scars of this confrontation will linger. They mark a turning point in U.S.–India relations, a test of resilience for Indian industry, and a warning to all nations that the age of weaponised interdependence has truly arrived.
(the writer can be reached at dipakkurmiglpltd@gmail.com)
