As global trade wars intensified during Donald Trump’s presidency, India found itself in the crosshairs of a broader U.S. effort to recalibrate its trade deficits. What began as a push to protect American manufacturers soon spilled into a series of retaliatory tariffs, special duty rollbacks, and diplomatic tensions. But even as the U.S. adopted a more aggressive trade posture, India had options—and still does.
Background: The Tariff Spat
The U.S. under Trump imposed tariffs on Indian steel and aluminum exports, citing national security. India responded with counter-tariffs on 28 U.S. products, including almonds, apples, and walnuts. The situation escalated when the U.S. revoked India’s preferential trade status under the Generalized System of Preferences (GSP), affecting nearly $6 billion worth of exports.
The fallout was clear: Indian exporters suffered, and bilateral trade frictions deepened.
Pathways to Resolution
1. Strategic Trade Diplomacy
India can adopt a more pragmatic and flexible stance in trade talks. By offering concessions in non-sensitive sectors (such as easing certain market access restrictions for American dairy or tech products), India could bargain for the reinstatement of GSP benefits or exemptions from punitive tariffs.
2. Strengthening Multilateral Ties
Rather than relying solely on bilateral negotiations, India could strengthen its presence in multilateral forums like the World Trade Organization (WTO). By leading coalitions of developing nations, India can highlight unfair practices and push for dispute resolution mechanisms to check unilateral tariff hikes.
3. Expanding Alternative Markets
Reducing dependence on the U.S. market is a long-term but essential strategy. India can diversify its export base by expanding trade partnerships with the EU, ASEAN, Africa, and Latin America. The success of trade pacts like the India-UAE CEPA (Comprehensive Economic Partnership Agreement) shows the potential of such diversification.
4. Domestic Reforms and Competitiveness
India must also turn inward. Improving the ease of doing business, reducing logistics costs, and boosting manufacturing competitiveness under initiatives like Make in India can make Indian goods more attractive globally—helping absorb tariff shocks better.
5. High-Level Political Engagement
Finally, personal diplomacy matters. Regular leader-to-leader engagements, like those between Modi and Trump during the latter’s tenure, can ease tensions and open backdoor negotiations. India could invest more in lobbying efforts and strategic communication in Washington, D.C., to build bipartisan goodwill.
Conclusion
India’s path out of Trump’s tax war lies in a multi-pronged approach—blending diplomacy, domestic reform, and global trade diversification. While the Trump-era trade policies may no longer be in force, their legacy continues to shape Indo-U.S. trade relations. By learning from the past and proactively shaping the future, India can turn challenges into opportunities.
