Trump, tariffs, trade and the India-US deal

Hindustan Times

30-07-2025

Since Donald Trump was sworn in once again as the 47th President of the US, the global strategic and economic communities have been recalibrating expectations around what the second wave of 'Making America Great Again' would entail. Central to this renewed thrust has been Trump's signature approach to trade: tariffs, trade rebalancing, and the assertion of American economic power through unilateral measures. On April 2, 2025, the White House declared a 'national emergency' under the pretext of unfair foreign trade practices. The day was marked as Liberation Day, ushering in a new regime of reciprocal tariffs on US trade partners, including allies and rivals alike. US President Donald Trump arrives on the South Lawn of the White House in Washington, DC, on July 29, 2025. (AFP)
Although most countries, including India, were given a 90-day suspension window to negotiate a way out, China was immediately slapped with an aggressive 145% tariff on exports to the US, prompting a retaliatory 125% tariff on US goods. The repercussions were immediate—hitting both US stock and bond markets. On May 14, the two countries partially rolled back these measures, with US tariffs on China reduced to 30% and Chinese duties on American goods cut to 10%.
This tariff volatility occurs at a precarious juncture in the post-pandemic world economy—one already grappling with disrupted supply chains, resource competition, rising debt levels, and fragile labor markets. Simultaneously, geopolitical tensions across Europe, West Asia, and the Indo-Pacific continue to strain global trading practices, driving many countries toward protectionist policies aimed at shielding domestic economies.
India has emerged as a unique and strategically significant actor in this rapidly changing scenario. In the initial April 2 executive order, India was marked for a 26% reciprocal tariff—listing 'non-reciprocal trading practices'. Key Indian sectors—electronics, automobiles, textiles, jewelry, and medical devices—were targeted, though pharmaceuticals were initially exempted.
On July 7, Trump sent official tariff notices to 14 nations, including Japan, South Korea, and several ASEAN members. The tariffs, set to go into force on August 1, range from 25% to 40%, prompting growing concerns over their economic and strategic implications.
In a major turn, India was excluded from the final list of 14 countries notified by the US on July 7 to face new tariffs from August 1. President Trump publicly remarked that a 'very big' deal with India was near, and treasury secretary Charles Bessent confirmed the two countries were 'very close' to finalising a 'mini trade deal.'
Although an official announcement is still pending, India is pressing for duty relief on exports and the removal of retaliatory tariffs. The United States has reportedly asked for more market access for US goods. Agriculture, however, remains a major sticking point. Finance minister Nirmala Sitharaman reiterated that agriculture is a 'red line,' underscoring India's need to protect its domestic farmers.
Meanwhile, Trump has signaled potential 50% tariffs on copper and up to 200% on pharmaceuticals. While viewed by investors more as negotiating leverage than immediate threats, it may impact particularly the pharmaceutical industry in India. India's exposure to copper exports to the US remains modest (around 10,000 tonnes annually), however, even if tariffs hit copper export, the increasing domestic demand would compensate for that. It is the pharmaceutical sector that seems more vulnerable as it supplies over 40% of generics to the US. India's exports of pharmaceutical products to the US in FY24 was worth $ 8.73 billion. Nonetheless, there is a flip side to it as well. The American health care depends heavily on generic drugs, any hasty decision may impact lives across the United States. These tariffs could create supply chain disruptions, negatively impacting accessibility and affordability of medical drugs and can create a potential crisis, as health care remains one of the most polarised and contentious political issues in the US. Hence, Washington is also expected to tread cautiously on this domain.
India appears more prepared than before to navigate shifting US trade priorities. Bilateral ties—particularly in defense, critical technologies, and supply chain resilience—have advanced under both Trump administrations. The resolution of all WTO disputes between the two nations under President Biden in 2023 also laid a foundation for deeper cooperation.
India's restrained and calculated diplomatic approach gives hope for dividends. Its strategic economic policies—Make in India, PLI schemes, and Atmanirbhar Bharat—have increased its global competitiveness. In a world diversifying around China+1 strategies, India has emerged as a viable option.
However, analysts have cautioned that the Trump administration's pressure-tariff model— the Global Trade Research Initiative (GTRI) has labeled the Yielding to American Tariff Retaliation Agreement (YATRA) may lead to imbalanced trade-offs if not managed with caution.
The Indian market has been showing mixed reaction over the on and off threats of tariff imposition by the US. In April, the Reserve Bank of India revised its growth forecast to 6.5% (from 6.7%), while Goldman Sachs projected 6.1%, citing tariff shocks and global headwinds. India's finance secretary also warned that the US tariffs could shave off between 0.2 to 0.5 percentage points from FY25 GDP growth. Despite the macroeconomic stress, India's stock market demonstrated resilience. Benchmark indices dipped by 3,000 points in pre-open trade post-announcement but stabilised soon. The rupee has weakened in general, but has remained between the range of 85.4-85.7 per dollar, reflecting relative stability despite geopolitical turbulence. The threat of an additional 10% tariff on Brics by Trump has the possibility of creating some negative ripples in the Indian market.
While uncertainties remain—particularly around agriculture, digital services, and regulatory standards—the situation also presents a rare convergence of strategic interests between India and the US
India's share in global trade has expanded over the last two decades. While recent tariffs may impose short-term volatility, they are unlikely to derail India's long-term growth trajectory. Structural reforms, a robust digital economy, and industrial policy resilience have made India more immune to external shocks than in previous decades.
Whether India can achieve tangible concessions on US agricultural subsidies, in exchange for flexibility on industrial goods and market access, remains to be seen. The August 1 deadline looms as a test for Indian negotiators—and an opportunity to secure a long-overdue arrangement in bilateral trade.
With the global trade policies and business models undergoing transformation, Indian businesses may find in this moment not just risk, but also strategic opportunity—in sectors like electronics, textiles, and semiconductors—depending on how effectively they innovate and negotiate.
This article is authored by Sweta Kumari, international relations analyst, New Delhi.