Editorial     

Published: February 28, 2025
Updated: February 28, 2025

Need for diplomatic strategy to deal with Trump tariff war

The Indian economy, which is passing through an extremely difficult time with a slow ing GDP, declining exports, rising inflation, continued devaluation of the rupee against the US dollar, declining urban and rural consumption, and the slowing down of the wheels of the manufacturing sector, is on the verge of suffering a body blow if US President Trump follows up on his warning of imposing stiff tariffs on India and other US trade partners. Like it or not, India is currently not in a position to tide over a sharp US tariff hike, which may revolt in a staggering loss of Rs. seven lakh crore.

As it happens, the US is India’s largest export destination, accounting for around 18 per cent of total global exports from India in fiscal 2024. Our US exports comprise mainly pharmaceuticals, chemicals, textiles, automotive components, agriculture prod ucts and gems & jewellery. If reciprocal US tariffs are imposed on these items, Indian exports will suffer a severe setback, hitting the country’s economy very hard. In fact, it would not be an exaggeration to say that this will administer a body blow to the Indian economy.

The Modi government, which has not been giving its fullest attention to the economic problems the country is facing, should not ignore the serious threat posed by Mr Trump’s impending tariffs. The government should persuade the US President to offer liberal con cessions to India on major export items. After all, during his recent visit to the US, Prime Minister Modi had agreed to Mr Trump’s demand to import oil, gas and F-35 jet planes from the US. Can’t we then expect concessions on tariffs on our export items in return? It would not impact the US economy much but it will be a question of life and death for the Indian economy.

The situation is so explosive that the time has come for India to adopt a strategy that focuses on strategic autonomy, economic diversification, domestic capacity building and climate resilience.

It is widely speculated that Mr Trump’s second term as US President will bring about a seismic shift in the global economic and political landscape. He is determined to make the US such a powerful nation that no country will even think of crossing swords with it on any issue. In fact, instead of playing with words like MAGA and MIGA, Mr Modi should strive to make his promising ‘Make in India’ policys a real success.

Unfortunately, the ground reality is that India, which had earlier vowed to stop imports from China, has today become its largest trade partner with huge imports from Beijing. As a result, today it is not ‘Make in India’ but ‘Made in China and Imported by India’. This trend should be reversed and the government should go all out to make ‘Make in India’ a huge success.

Meanwhile, the utmost importance should be given to try to soften the impact of US tariffs on Indian exports. If Prime Minister can use his personal ‘dosti’ with Mr Trump to extract special tariff concessions for India, he will have made a signal diplomatic contribu tion to the health of the country’s economy.