How Is India Responding to Donald Trump's Tariff Blow? A Closer Look at the Government's Strategy

SUMMARY

In the context of market volatility, New Delhi is reportedly leveraging preliminary trade discussions with Washington to secure a more favorable position relative to regional counterparts like China, Vietnam, and Indonesia.

India is unlikely to respond to US President Donald Trump’s recent tariff increase on imports from the country, as ongoing trade agreement negotiations between New Delhi and Washington are progressing, Reuters reported on Sunday, citing a government official.

The official noted that New Delhi is examining a clause in Trump’s tariff policy that might exempt countries who "take significant steps to remedy non-reciprocal trade arrangements."

The US tariff hike, part of Trump’s trade strategy, has unsettled global markets, with India’s Sensex dropping 3,939.68 points to 71,425.01 and the Nifty decreasing by 1,160.8 points to 21,743.65 in early trade on Monday.

Hong Kong’s Hang Seng fell nearly 11%, Japan’s Nikkei 225 declined almost 7%, Shanghai Composite dropped over 6%, and South Korea’s Kospi decreased by 5%.

According to the report, India sees a benefit in being among the first countries to start trade talks with the US, positioning itself more favorably than regional peers like China, Vietnam, and Indonesia, who have encountered similar tariff actions.

Following trade discussions between Indian and US officials in New Delhi late last month, both sides agreed to pursue a Bilateral Trade Agreement (BTA) aiming for $500 billion in trade by 2030, a target set during Prime Minister Narendra Modi’s February visit to Washington.

The talks, following Union Commerce Minister Piyush Goyal’s earlier trip to the US, aim to finalize an initial tranche by fall 2025.

As part of efforts to foster goodwill with the Trump administration, the Modi government has already taken measures such as reducing import duties on high-end motorcycles and bourbon, and eliminating a controversial digital services tax that affected American technology firms.

The Commerce Ministry, in a statement issued last week, said the government was “carefully examining” the impact of the US tariff measures and is actively consulting with domestic stakeholders.

“In line with the vision of 'Viksit Bharat,' the Department is actively consulting stakeholders, including Indian industry and exporters, to understand their assessment of the tariffs and evaluate the situation,” the ministry stated.

Both countries are currently negotiating a comprehensive Bilateral Trade Agreement under the ‘Mission 500’ framework, which aims to double two-way trade to USD 500 billion by 2030. Talks are focused on enhancing supply chain integration, increasing investments, and promoting technology transfer.

“Discussions are ongoing between Indian and US trade teams for the swift conclusion of a mutually beneficial, multi-sectoral Bilateral Trade Agreement,” the ministry added.