IMEC offers hope as Trump tariffs threaten Indian markets

Hindustan Times

3 days ago

Two distinctly different yet related events took place on August 5-6, 2025, with regards to India. On the one hand, US President Donald Trump initially announced a tariff of 25% on Indian goods being exported to the US and then added another 25% the next day as a 'punishment' to India for supporting Russia in its war against Ukraine by buying cheap crude oil. Concurrently, the first official meeting of the eight signatory countries of the India-Middle East-Europe-Economic Corridor (IMEC) was held in Delhi, hosted by the National Security Council Secretariat. Along with the other country representatives, the US was represented by Ricky Gill, who is the special assistant to the US President for national security affairs and the US National Security Council's senior director for South and Central Asia. The aim of the meeting was to find a way to kickstart the long delayed economic corridor, the IMEC. Donald Trump (Bloomberg File Photo)
What does IMEC aim to achieve—for a start, closer integration of the three regions (India, West Asia and Europe) through trade and better connectivity. With Trump hitting India hard with tariffs, there were some speculation that the American delegation may not travel to India, but that did not happen and the delegation participated in the talks, the first of its kind since the announcement of IMEC on the sidelines of India's G20 Summit in Delhi in September 2023.
IMEC is one of the most transformative and ambitious projects announced with regards to economic integration and trade connectivity. In its concept, it is a bold vision to connect India with Europe across the deserts of the Arabian Peninsula. It envisions a multi-modal economic corridor involving multiple businesses, integrating railways, ports, highways, energy networks, and digital infrastructure to enhance trade, investment, and connectivity across the continents. The Memorandum of Understanding (MoU) on the project was signed by India, the US, Saudi Arabia, UAE, France, Germany, Italy, and the European Union (EU).
The proposed structure of the IMEC has three distinct sections. The eastern section links India with West Asia via sea links, the central section is the overland route across the West Asian region, culminating at the port of Haifa on the Mediterranean coast in Israel. The western leg of the corridor is sea-bound, where the containers have to be put back on ships in Haifa, to be transported to various ports in Europe.
The success of IMEC depends upon developing a seamless connectivity network of ports, ships and rails. A digitally connected, uniform and fully integrated customs and regulatory framework is the backbone for success of such a project. In addition to transporting containers, IMEC also plans to include infrastructure for electricity transmission, digital connectivity, as well as pipelines for clean hydrogen export. When implemented in full, it promises to unlock new opportunities of multi-dimensional trade through multi-modal transport linkages across regions that have traditionally been close trade partners. It has the potential to facilitate faster and more efficient movement of goods, bypassing existing bottlenecks, reducing shipping delays, lowering greenhouse gas emissions, and cutting costs.
There is even talk of developing a southern leg in the IMEC later, which would then link up with key connectivity corridors in Africa to facilitate two-way trade with Africa too
For India, in particular, IMEC represents a strategic vision beyond physical infrastructure and is an instrument for building a more connected, resilient, and inclusive global order. For India, it aligns with its Act East and Link West policies and reinforces its role as a bridge between regions, enhancing both economic engagement and geopolitical influence.
As India charts its course towards becoming a developed nation and a $30 trillion economy by 2047, infrastructure corridors such as IMEC are vital drivers. Considering China's current dominance in global manufacturing, which is at 30% versus India's 3% share, India has a lot of ground to cover. For India to become the 'factory of the world,' industrial corridors would need to be scaled up, manufacturing capacity boosted, and these hubs must be linked through strategic infrastructure like IMEC.
In terms of trade between the Europe and India, IMEC can be an economic game changer and an opportunity to strengthen strategic partnerships. The president of the European Commission, Ursula von der Leyen, during her visit to India in March 2025, had pitched for the IMEC as an important cornerstone for enhancing India-EU trade. Earlier, the French President had described IMEC as a 'fabulous catalyst' for concrete projects and investments while pitching Marseille port as one of the entry points for IMEC during PM Modi's visit to France in February 2025 for the Global AI Summit.
The enthusiasm comes from the fact that the EU is India's largest trading partner, accounting for €124 billion worth of trade in goods in 2023 or 12.2% of total Indian trade, surpassing the US (10.8%) and China (10.5%). The EU is also the second-largest destination for Indian exports (17.5% of the total) after the US (17.6%).
On the other hand, however, India is the EU's 9th largest trading partner, accounting for 2.2% of the EU's total trade in goods in 2023, well behind the US (16.7%), China (14.6%), or the UK (10.1%). Within this overall trade figures, trade in goods between the EU and India has increased by almost 90% in the last decade, whereas the trade in services between the EU and India reached €50.8 billion in 2023, up from €30.4 billion in 2020.
With this considerable volume of trade, the EU and India are looking for ways to enhance the trade potential further. Both sides are also negotiating an ambitious FTA (free trade agreement) which promises to increase trade beyond € 200 billion. One key issue that could help reach the agreement on FTA is a faster, more secure, and cheaper transit route, which the IMEC promises.
One of IMEC's most unique dimensions is its integration of green hydrogen into the corridor's architecture. The ability to transport green hydrogen across borders offers a major breakthrough for the global clean energy transition. India's twin objectives—energy independence by 2047 and net-zero emissions by 2070—are closely tied to the successful deployment of renewable energy technologies. Green hydrogen emerges as a transformative energy carrier within this shift, offering long-duration energy storage, a replacement for fossil fuels in hard-to-abate industrial sectors, and clean mobility solutions.
Indian companies have taken huge strides in developing infrastructure for producing green hydrogen. Europe is looking at reliable markets to offer green fuel as they strive to achieve net zero emissions. IMEC offers India a unique opportunity to position itself as a global hub for green hydrogen. India has committed $2.5 billion toward building a robust green hydrogen ecosystem, with companies like Adani Group, Larsen & Toubro, and ReNew Energy Global leading infrastructure and technology deployment.
India has also emerged as the leader in producing and promoting solar energy. It is closely linked to India's call for establishing One Sun, One World, One Grid (OSOWOG) initiative which envisions a globally interconnected solar grid, enabling real-time cross-border energy sharing. This model benefits India by reducing dependence on costly storage systems while maximising the efficiency of renewable generation. This too presents a unique opportunity for India to deepen its economic integration with the region as also deepen climate preservation, promote energy interdependence, and generate industrial and financial synergies.
Also, the combination of a faster route using IMEC for perishable, fast moving and costly goods while keeping the option of Suez Route running for bulk products like crude oil can become a win-win strategy for all stakeholders. When overlapped with the economic benefits of transporting green hydrogen, solar energy, high speed internet etc, IMEC can be a game changer in years to come.
Trump tariffs may have presented a challenge for India but it is also an opportunity to seek diversified and reliable partnerships. Europe too, which is reeling from tariff threats from the US and had to submit to its tariff demands, is looking at India as a reliable partner. Other signatories of IMEC, along with some potential additions like Egypt, Oman, Israel, Jordan, Cyprus and Greece already have close strategic ties with India. IMEC offers the perfect link for a faster, secure and more efficient between India and these countries. The fact that the project brings together economically strong, politically influential, and ideologically compatible countries, offering India a vital opportunity to cement its presence and deepen its influence in the region, is an added advantage.
The lessons from recent global shocks—including the Covid pandemic, the Russia-Ukraine war, Gaza War and the tariff war under the Trump administration highlight the urgent need for and secure connectivity options and resilient supply chains. IMEC offers a critical response to these disruptions by providing an alternative and reliable trade route.
With the right mix of infrastructure investment, diplomatic engagement, and institutional coordination, IMEC can become a cornerstone of 21st-century connectivity, linking continents and creating new avenues for shared prosperity. For India specifically, IMEC offers the perfect opportunity to look beyond the US tariff war, to explore all necessary steps to safeguard its national interests and economic security.
This article is authored by Rajeev Agarwal (retd), senior research consultant, CRF, Chintan Research Foundation, New Delhi.