The US President has slapped 50 per cent tariffs on Indian goods, which might hit the Indian economy badly, but it is certainly not the end of the road
In an unprecedented move, the US President has done what he has been threatening all along. His decision to slap a 50 per cent tariff on Indian goods — coupled with threats of secondary sanctions — has triggered one of the sharpest escalations in bilateral trade relations in recent years. The move is indeed worrisome, as some 18 per cent of Indian goods reach US shores every year. Yet, in New Delhi, while the concern is genuine, the approach is pragmatic. The mood is less about desperation and more about calculation — a recognition that this move may be as much a negotiating tactic as an economic strike. The US move has achieved something missing so far in the Indian landscape: Unity.
The whole Opposition is standing with the Government in taking on Trump. Prime Minister Narendra Modi now has a rare political advantage: The open backing of the Opposition to push back against Washington. This united domestic front could harden India’s stance in ongoing trade negotiations, particularly on issues that directly affect politically sensitive sectors such as agriculture.
What the US wants is easy access to the Indian market, but that may be detrimental to Indian interests. The cost of access to the dairy industry, for instance, may alone be equal to the cost of tariffs. The cost of allowing US dairy imports into India could be as damaging as the tariffs themselves, estimated at around `1.8 lakh crore ($20 billion).
Even the most pessimistic projections, such as Morgan Stanley’s estimate of a 60-basis-point hit to GDP (around $23 billion), suggest pain but not devastation. Foreign direct investment could also take a hit, with higher tariffs making India marginally less attractive for certain US — linked manufacturing investments. The weaker rupee could, over time, soften the blow for exporters. Much of India’s services trade — accounting for about 40 per cent of its US trade — remains untouched.
The tariffs are explicitly tied to India’s continued oil imports from Russia. Washington’s stance has drawn accusations of hypocrisy from New Delhi, pointing to America’s own continued trade with Moscow. Despite the provocation, India’s response so far has been measured, yet firm in defending red lines.
Rushing into countermeasures risks foreclosing a negotiated solution, especially when the US may be using tariffs as a bargaining chip. India has already shown goodwill in other areas — from reducing duties on select American goods to inviting Tesla to set up operations in Mumbai, and even withdrawing the so-called “Google tax” on digital services. With the potential for geopolitical shifts in the coming weeks, New Delhi has every reason to watch developments closely before committing to major concessions. Until then, economic resilience and a diversified trade strategy may allow India to ride out the turbulence — and perhaps even turn the tariffs into a moment of leverage.
