India Must Ignore Trump's Trade Tariff Trap
US President Donald Trump is becoming increasingly unpredictable, if not crazy, with his freakish combination of styles to deal with countries and issues – from trade to diplomacy. The 25 percent import tariff on India since last Friday may not considerably hurt India's export trade with the US, but it threatens to develop a crack, or maybe even distrust, in the well-developed India-US diplomatic relations over the past several years. And, that should be a bigger concern before the democratic institutions in both India and the US. Trump is most unlikely to remain as the effective US president after the November 2028 election though he is selling 'Trump 2028' caps suggesting there may be loopholes to the president's two-term limit. He seems to be hell-bent on creating enough confusion around the so-called US allies for the next president to repair them easily.
India is not a trade surplus country. Its global merchandise trade deficit has been growing year after year. In 2024-25, the country's trade deficit jumped to $282.83 billion from $241 billion in the previous fiscal year. The Indian government does not seem to be quite concerned. The US too is a big trade deficit country. Last year, the US recorded a historic $1.2-trillion goods trade deficit. Ironically, behind the ballooning trade gap of both the US and India is China. India's goods trade surplus with the US may have doubled over the last decade, rising from $20 billion in 2015 to $40 billion in 2025, but its trade deficit with China has more than doubled during this period, reaching a record high of $99.2 billion in 2024-25. According to the UN COMTRADE database on international trade, China had slashed down imports from India to merely $18 billion, last year. India neither protested nor took action to drastically cut imports from China.
If China's anti-India import policy does not hurt the sentiments of the import-insensitive Indian government, the dumping of a mere 25 percent import tariff on India by President Trump on certain select items such as textiles, telecom, gems and jewellery, oil and gas, and food and agriculture with effect from this month should not unduly concern India. Unfortunately, the Indian government and the local media have always been more focussed and sensitive on US policies than Chinese practices. While the US trade policy has always been linked with its foreign policy, India's trade policy seems to totally ignore China's highly aggressive foreign policy that seeks to surround India with its growing military presence all around the country. The so-called Atmanirbhar Bharat (self-reliant India) continues to import more and more from China. India imports a very large range of low-cost products from China, including electronics, fashion apparel, toys, and industrial machinery despite concerns over their potential impact on India's domestic industries and employment. Massive imports from China are primarily responsible for growing unemployment in India.
India has been a major importer of Chinese smartphones, laptops, televisions, and other low-cost electronic devices such as clothing and textiles including activewear, casual wear, and children's fashion, to meet the country's growing local demand. India's significant portion of toy imports come from China. The current size of India's toy market is worth over $1.2 billion. Chinese manufacturers offer a wide variety of affordable and innovative toys. India also imports a wide range of other low-cost products from China, including household goods, kitchenware, baby carriages, and consumer products. The influx of cheap Chinese imports is challenging India's domestic manufacturers, potentially impacting their competitiveness and production. Leave alone the domestic job loss.
Trump's trade tantrums apart, India could import a lot more from the US, instead of China, especially in areas where the US has a competitive advantage. A shift in India's trade approach could be driven by factors such as diversification of supply chains, reducing dependence on China, and potentially leveraging the US's technological and manufacturing prowess. The country's reliance on China, particularly in areas like electronics and pharmaceuticals, creates strategic vulnerabilities. India should import more from the US where it has an intrinsic strength that could help India reduce its dependence on China and build more resilient supply chains. The US continues to be a major global exporter of goods across various sectors, including machinery, electronics, and pharmaceuticals. In fact, India could utilise the services of many top US companies which are present in India and doing very good business in the country as well as exporting their wares to influence US trade and business decisions.
A number of prominent US multinational companies have significant manufacturing operations in India. They include Ford (exporting engines from its Chennai plant, and making software development), General Electric (GE), Honeywell, Apple, Cisco, Cognizant and Cummins to mention a few. These US giants have chosen India for its skilled workforce and growing market. GE has a long-standing relationship with India. It manufactures various products and technologies across different sectors. Honeywell has a strong manufacturing footprint in India, focusing on aerospace, building technologies, and performance materials. Cummins, a global power technology leader, manufactures engines and related components in India. Apple Inc. has so far ignored the Trump threat to expand India operations and export back to the US.
The 3M, a diversified science company, has invested in manufacturing in India to serve both the domestic and export markets. The Boeing company has been expanding its manufacturing activities, leveraging the country's growing aerospace industry. Boeing is using India's capability to outsource products and services with a network of some 300 Indian suppliers. The business is worth $1.25 billion annually. Boeing's engineering and technology centre in Bengaluru is one of its largest outside the US. Apple has also ramped up its manufacturing in India, partnering with such global leaders such as Wistron and Foxconn to produce iPhones. The US e-commerce giant Amazon has invested big in India, creating its own infrastructure and supply chain to support the growing online marketplace. Cisco, a global US leader in networking and cybersecurity, has a strong presence in the country, which covers manufacturing and research and development among others.
Whimsical Trump's bid to strongly disturb the matured India-US economic and diplomatic relations may have something to do with his age. President Trump will reach 80 in next June. This may somewhat explain his growing capricious nature in dealing with the complex international issues and markedly strange utterances and suggestions slamming India and Russia as 'dead economies' after tariff stand-off and the US drilling oil in Pakistan which is 85 percent import dependent to meet its energy needs. Having road-tested a hardball tactic in his first term (January 20, 2017 to January 20, 2021), President Trump seems to have taken it to new levels. Earlier this year, a global survey found that India was the most upbeat of any nation about what a second Donald Trump presidency would mean for the country. The survey panel must be having second thoughts now. For India, it must strongly avoid falling into a Trump trap and continue to play cool. (IPA Service)
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