US President Donald Trump's 50% tariffs on India came into effect on 27 August. So far, rather than retaliating, India has put forth a carefully orchestrated geopolitical response to signal its displeasure to the US. There's been the much publicised attempt at a rapprochement with China, and striking images of Prime Minister Narendra Modi sharing a limousine ride with Russian President Vladimir Putin splashed across the media from the sidelines of a security forum meeting in Tianjin.
Domestically, Modi has announced some help for struggling exporters and there are tax cuts on the anvil to mitigate the impact on exports. But Delhi finds itself in an unenviable spot. The tariff impasse with its largest trading partner has continued far longer than anticipated, trade negotiations with Washington have come to a halt and the already damaged ties are fraying further with daily admonishments from US officials.
The repercussions are significant. Prolonged 50% tariffs could shave off as much as 0.8% of India's GDP, according to some estimates. India's exports to the US could drop by as much as $35bn this financial year and put hundreds of thousands of jobs across key industries like textiles, gems and jewellery and leather at risk.
Pushed to the brink, the question some are asking is whether Delhi will retaliate? And if not, what are its least damaging options? If the past is any precedent, India hasn't shied away from retaliation. It imposed steep tariffs on some 28 US products back in 2019 when the US refused to exempt the country from higher tariffs on steel and aluminium.
But this time, escalating the trade war will not be in India's interests, say experts. Retaliation is a very costly and unproductive strategy because at the end of the day India depends more on the United States than is the case in reverse, Ashley Tellis, a professor at the Carnegie Endowment for International Peace, told The Wire portal in an interview. At $86bn, India's goods exports to the US are nearly three times higher than the US's goods exports to India.
Experts advocate for diversifying export markets, advising India to cultivate economic and diplomatic ties with countries like Mexico, Canada, and China while also strengthening trade ties with governments concerned about Trump's tariffs. Already, indications show that Delhi is actively working to expedite other trade pacts, having signed a comprehensive agreement with the UK and discussing advanced stages of an India-EU trade deal. However, experts warn that diversification will not be a quick fix and highlight the necessity to strengthen domestic competitiveness through technology and quality upgradation for exporters.
As India assesses its strategic options, the complexities of trade with the US and the unpredictability of Trump's policies loom large, emphasizing the urgency for a decisive diplomatic approach.
Domestically, Modi has announced some help for struggling exporters and there are tax cuts on the anvil to mitigate the impact on exports. But Delhi finds itself in an unenviable spot. The tariff impasse with its largest trading partner has continued far longer than anticipated, trade negotiations with Washington have come to a halt and the already damaged ties are fraying further with daily admonishments from US officials.
The repercussions are significant. Prolonged 50% tariffs could shave off as much as 0.8% of India's GDP, according to some estimates. India's exports to the US could drop by as much as $35bn this financial year and put hundreds of thousands of jobs across key industries like textiles, gems and jewellery and leather at risk.
Pushed to the brink, the question some are asking is whether Delhi will retaliate? And if not, what are its least damaging options? If the past is any precedent, India hasn't shied away from retaliation. It imposed steep tariffs on some 28 US products back in 2019 when the US refused to exempt the country from higher tariffs on steel and aluminium.
But this time, escalating the trade war will not be in India's interests, say experts. Retaliation is a very costly and unproductive strategy because at the end of the day India depends more on the United States than is the case in reverse, Ashley Tellis, a professor at the Carnegie Endowment for International Peace, told The Wire portal in an interview. At $86bn, India's goods exports to the US are nearly three times higher than the US's goods exports to India.
Experts advocate for diversifying export markets, advising India to cultivate economic and diplomatic ties with countries like Mexico, Canada, and China while also strengthening trade ties with governments concerned about Trump's tariffs. Already, indications show that Delhi is actively working to expedite other trade pacts, having signed a comprehensive agreement with the UK and discussing advanced stages of an India-EU trade deal. However, experts warn that diversification will not be a quick fix and highlight the necessity to strengthen domestic competitiveness through technology and quality upgradation for exporters.
As India assesses its strategic options, the complexities of trade with the US and the unpredictability of Trump's policies loom large, emphasizing the urgency for a decisive diplomatic approach.
