India's Tariff Diplomacy: Strategic Autonomy In Fractured Global Order
India's tariff diplomacy under PM Narendra Modi offers blueprint for other nations: strategic autonomy is not about isolation but about building resilience through diversification
In an era where tariffs have re-emerged as a weapon of choice in global diplomacy, India stands as a compelling case study of a nation that has not only safeguarded its economic interests but also transformed external pressures into opportunities for growth and strategic autonomy.
From Washington to Beijing, tariffs have transcended their traditional role as tools for resolving trade disputes, evolving into calculated instruments of geopolitical influence, economic resilience testing, and concession extraction.
Carnegie Endowment for International Peace has summarised this world order effectively, it says : The 'global order' is no longer shaped by alliances alone—it is shaped by the ability of nations to protect their own economic sovereignty. Under Prime Minister Narendra Modi's leadership, India has navigated this volatile landscape with a blend of resolve, pragmatism, positioning itself as a pivotal player in a multipolar world.
Tariffs are far from a modern invention. Their use as instruments of economic protection and geopolitical leverage dates back centuries. The United States, for instance, passed its first tariff law — the Tariff Act of 1789 — within months of ratifying its Constitution. This act imposed duties of 5-10% on imports to shield nascent American industries from European competition, particularly British manufactures, while generating revenue for the fledgling republic. Similarly, Britain's Corn Laws, enacted in 1815 and repealed in 1846, protected domestic agriculture from foreign grain imports, reflecting the economic nationalism of the era.
The 20th century saw tariffs fall out of favour during the high tide of globalisation in the 1990s. The establishment of the World Trade Organization (WTO) in 1995, coupled with a proliferation of Free Trade Agreements (FTAs) and multilateral pacts, relegated tariffs to the margins of economic policy.
However, the 21st century has witnessed a dramatic resurgence of tariffs among the architects of globalisation.
The U.S.–China trade conflict, initiated in 2018 with tariffs on Chinese goods, marked a turning point, signalling that economic coercion through trade barriers was back on the global stage. Similarly, disputes such as the U.S.–EU steel and aluminium tariffs (2018–2021) and Japan–South Korea technology export restrictions (2019–2023) illustrate how tariffs have become tools of strategic rivalry, wielded against allies and adversaries alike.
On July 30, 2025, U.S. President Donald Trump announced tariffs ranging from 10-20% on Indian goods on the pretext of safeguarding US industries and the need to bolster American manufacturing. Less than a week later, The U.S. expanded the tariffs with India on imports of Russian oil—knowing fully well that the U.S., EU, and China were themselves buying more from Russia. As of mid-2025, China remains the top buyer of Russian crude—accounting for about 47% of its exports in July with the EU importing 18% of Russian Energy in 2024 & U.S. still purchasing key commodities like fertilizers, uranium, and palladium from Russia.
In 2022, during the Russia Ukraine conflict, when crude oil prices were threatening to soar past $150 a barrel, the U.S. privately urged India to step up Russian oil purchases; India responded by ramping up Russian crude imports, purchasing millions of barrels at $20–30 below Brent. This strategic move prevented global oil prices from spiralling to $150–200, stabilising them in the $80–90 range. By doing so, India averted a global inflation surge—saving the world economy & shielding 1.4 billion Indians from fuel price shocks while cutting its own import bill by $7-8 billion a year.
India today sources crude oil from over 40 countries across five continents, a diversification strategy built to shield the economy from geopolitical shocks, price volatility, and supply disruptions; this expanded basket — ranging from Russia, Iraq, Saudi Arabia, and the UAE to the U.S., Brazil, Nigeria, and even small producers in Latin America and Africa — means no single nation controls India's energy lifeline, ensuring steady supply for its 1.4 billion citizens while giving New Delhi the leverage to secure the best prices in the global market.
On US tariffs, India, as the fourth-largest economy, responded by reaffirming its sovereign right to make independent energy choices, diversifying its trade channels, boosting rupee-based settlements, and protecting its economic security as well as the affordability of fuel for its citizens as was made clear in the detailed MEA statement on August 6.
Such aggressive tariff measures might have pressured a nation into reactive concessions or retaliatory escalation. India, however, responded with a measured yet confident strategy, reflecting a sophisticated understanding of its permanent interests—a principle articulated as early as 1848 by British Foreign Secretary Lord Palmerston, who told the House of Commons, 'We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow." This maxim resonates deeply in India's approach to 21st-century tariff conflict.
Rather than engaging in tit-for-tat tariff hikes, New Delhi pursued a multi-pronged strategy. India had already accelerated efforts to diversify its export markets, concluding trade talks with the European Union (FTA negotiations resumed in 2023, targeting completion by 2026), the United Arab Emirates (CEPA signed in 2022, boosting bilateral trade to $85 billion by 2024), Australia (ECA signed in 2022, with trade projected to reach $45 billion by 2027), and the United Kingdom (FTA talks nearing conclusion in 2025). These agreements reduce India's reliance on any single market.
India's response to the 2025 U.S. tariffs encapsulates a broader vision of economic sovereignty through diversification. By expanding trade partnerships, bolstering domestic manufacturing, and maintaining diplomatic flexibility, India under PM Modi has mitigated the risks of over-dependence on any single nation. The Modi government's investments in infrastructure—such as the Rs 44 lakh crore National Infrastructure Pipeline (2019–2025)—have enhanced India's trade logistics, reducing port turnaround times by 40% and boosting export competitiveness.
Domestically, through the years, India has doubled down on its Aatmanirbhar Bharat (Self-Reliant India) initiative, launched in 2020, which has driven manufacturing growth through policies like the Production Linked Incentive (PLI) scheme. By 2025, the PLI scheme had attracted Rs 4.78 lakh crore ($60 billion) in investments across 14 sectors, including electronics, pharmaceuticals, and renewable energy, creating over 8 lakh direct and indirect jobs. For instance, India's electronics manufacturing sector, bolstered by PLI incentives, grew from $48 billion in 2019 to $115 billion by 2025, with companies like Apple shifting 14% of iPhone production to India. This domestic capacity building has cushioned India against external trade shocks, ensuring that tariff-induced disruptions do not derail economic momentum. India's exports hit a record USD 824.9 billion in 2024-25 (up 6%), with electronics up 32.5%, pharmaceuticals up 9.4%, agriculture up 7.4%, and services surging 13.6%, putting the country on track to cross USD 1 trillion in FY 26.
India's resilience in the face of tariff pressures stems from its unique position as one of the world's largest and most dynamic consumer markets. With a population of 1.45 billion, a middle class projected to drive consumption to $6 trillion by 2030, and a workforce adding 12 million new entrants annually, India wields significant bargaining power. Its domestic market is attractive for global investors and trade partners, making it difficult for any nation to sideline India in the global trade architecture. For example, India's pharmaceutical industry, often called the 'pharmacy of the world", supplies 20% of global generic drugs by volume, including critical medications for the U.S. and EU. This market leverage gives India the confidence to negotiate from a position of strength.
Moreover, India's focus on emerging sectors like renewable energy and semiconductors aligns with global trends. The National Green Hydrogen Mission, launched in 2023 with a Rs 19,744 crore outlay, aims to make India a global leader in green hydrogen production by 2030, attracting $8 billion in investments by 2025. Similarly, the India Semiconductor Mission has secured commitments from companies like TSMC and Micron, with $10 billion in planned investments to establish India as a chip manufacturing hub. On August 12, 2025, the Union Cabinet approved four new semiconductor manufacturing projects under the India Semiconductor Mission, with a total investment of approximately Rs 4,594-4,600 crore, spanning across two units in Odisha and one each in Andhra Pradesh and Punjab. India is also set to produce it's first indigenous semiconductor chip soon.
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In a world where economic leverage is increasingly weaponized, India's tariff diplomacy under Prime Minister Narendra Modi offers a blueprint for other nations: strategic autonomy is not about isolation but about building resilience through diversification.
Pradeep Bhandari is BJP's National Spokesperson. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18's views.
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August 13, 2025, 12:56 IST
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