The Indo American Tariff Confrontation

President Donald Trump, the president of the strongest democracy of the world and Prime Minister Narendra Modi, the Prime Minister of the Largest Democracy of the world made a joint statement on February 13, 2025 at the time of Prime Minister Modi’s visit to USA which states, “As the leaders of sovereign and vibrant democracies that value freedom, the rule of law, human rights, and pluralism, President Trump and Prime Minister Modi reaffirmed the strength of the India-U.S. Comprehensive Global Strategic Partnership, anchored in mutual trust, shared interests, goodwill and robust engagement of their citizens”. It further states, “Today, President Trump and Prime Minister Modi launched a new initiative – the “U.S.-India COMPACT (Catalysing Opportunities for Military Partnership, Accelerated Commerce & Technology) for the 21st Century” – to drive transformative change across key pillars of cooperation. Under this initiative, they committed to a results-driven agenda with initial outcomes this year to demonstrate the level of trust for a mutually beneficial partnership”. 

“The drive towards US-India commitments to ‘a results-driven agenda with initial outcomes this year to demonstrate the level of trust for a mutually beneficial partnership’ includes mutual understanding in the fields of defense, Trade & Investment, Energy Security, Technology and Innovation, Multi-Lateral Co-operation and People to People Co-operation”. In the background of the visible attitude change of President Trump and his administration towards India after suspension of the hostilities between India and Pakistan, whether the envisaged co-operation between India and US will ever be implemented has become a wishful thinking. The worst pain in the world goes beyond the physical and even further beyond any other emotional pain one can feel, it is the betrayal of a friend. 

After the bonhomie exhibited between President Trump and Prime Minister Modi, there came the great betrayal of trust and understanding arrived at through their new initiative under the ‘U.S.-India COMPACT (Catalysing Opportunities for Military Partnership, Accelerated Commerce & Technology) for the 21st Century’ – to drive transformative change across key pillars of cooperation. Under this initiative, they committed to a results-driven agenda with initial outcomes this year to demonstrate the level of trust for a mutually beneficial partnership”. But what happened to the trust for mutually beneficial partnership? President Donald Trump has exposed himself through his actions to the world what a deceitful, hypocritical and untrustworthy person that he is?

While negotiations are going between Indo American officials on solving tariff problems, President Trump unilaterally announced imposition of higher tariff on India. “They have one of the highest tariffs in the world now, they're willing to cut it very substantially," Trump told reporters. "We're talking to India now - we'll see what happens ... You'll know by the end of this week." 

The 25% tariff figure plus penalty for doing business with Russia would single out India more severely than other major trading partners, and threaten to undo months of talks between the two countries, overlooking India as a strategic partner of Washington's and a counter balance to China.  The quantum of penalty to be imposed is not made clear. Trump indicated initially that the penalty was a response to India buying Russian arms and oil and its "obnoxious non-monetary Trade Barriers." Later at the White House, the Republican president indicated there was wiggle room. The 25% tariff, as well as an unspecified penalty announced by Trump would strain relations between the world's most populous democracy and the world’s strongest democracy.

The immediate fallouts of Trump’s announcement are expected to be as follows:

• On July 30, 2025, U.S. President Donald Trump announced a 25% tariff on goods imported from India which is set to take effect on August 7, 2025 which is inclusive of an additional unspecified penalty tied to India's ongoing purchases of Russian military equipment and energy resources.
• President Trump singled out India for having “among the highest tariffs in the world,” heavy non tariff barriers, and strategic ties within the BRICS bloc which U S viewed as an action taken against those nations which are acting against the business interest of United State. That was like Shakespeare’s grammatical and dramatic expression the “Most unkindest cut of all.”
• Even though trade talks are going on for an amicable trade settlement for mutual benefit, U S pressure under the premise that India’s average farm tariffs are about 39% compared to 5% in the U S, may impede trade talks because of India’s reluctance to dilute the protection given to local agriculture and allied sectors, MSME sector etc. which America wants to liberalise to give advantage to U S. 
• Optimism aroused by Prime Minister Modi’s February 2025 Washington visit and his ambition of doubling trade to $500 billion by 2030 to make India as the third largest economy overtaking Germany, has unravelled in recent months as negotiations are being hindered.
• India’s Key sectors including textiles, garments, auto parts, gems & jewellery, and machine tools are highly vulnerable to cancellation of orders and may lead to losing competitiveness. 
• “Analysts estimate a potential $5–7 billion annual export loss, alongside possible 40-basis-point drag on GDP growth in FY 25 26.”
• Despite this, pharmaceuticals are excluded from the 25% tariff, even though India supplies nearly half of U.S. generics—contributing over $8 billion annually to U.S. healthcare.
• “U.S. consumers may see price increases of up to 17% on apparel and 24% on jewellery and electronics, including mid-range smartphones assembled in India on account of tariffs.”
• “Some U.S. businesses fear higher costs for manufacturing and repair components due to impacted auto-part imports on account of tariffs.”
• “India is being used as a strategic example by being denied tariff exemptions amid broader U.S. efforts to penalize countries aligned with Russia or the BRICS alliance.”
• “Trump’s increasing friendly relationship with Pakistan through energy deals and favourable trade terms, have increased tensions with India, weakening the bilateral strategic narrative once advanced under Biden’s administration.”
• Pakistan’s involvement in helping and facilitating President Trumps family business interest particularly in promoting crypto currency is also one of the reasons for Trump administration showing favours to Pakistan.

Meeting the challenges

• India has to refrain from immediate retaliation with counter-tariffs, instead exploring options like increasing U.S. imports to the extent possible to placate Washington but without jeopardising Indian Trade interest. 
• India should reorient their internal reforms taking into account the opportunity available in the vast Indian market, export diversification through finalising Comprehensive Economic and Trade Agreements with the likeminded nations as has been concluded with the United Kingdom on July 24, 2025 to lessen the impact of tariffs imposed by President Trump.
• Since the trade tariffs imposed by President Donald Trump is bullying tactics adopted by him to subjugate other nations to fall in line with his thinking to favour American economic interest, it can be reversed provided a reasonable and meaningful concessions are arrived at between U S and India to conclude a Comprehensive Economic and Trade Agreement.
• President Trump can bully some of the nations all the time. All the nations some of the time. But not all the nations all the time. His rhetorics are coming out of an inherent fear of losing American global standing as the most powerful nation, economically and militarily, in the world in the wake of China, the competing power with America and the emerging power India. 
• “Pride is an admission of weakness; it secretly fears all competition and dreads all rivals” (Fulton J. Sheen-American religious leader, evangelist, writer, Roman Catholic priest, and radio and television personality). President Donald Trump has too much pride and ambition and he should not forget the old dictum “Pride goes before a fall” and what Shakespeare exposed in his play about Julias Caesar “If I fail it is only because I have too much pride and ambition.” Which is applicable to Trump also
• India being the largest consumer market of the world economy, India should exploit its formidable position by formulating a balanced, multi-pronged strategy considering the ongoing tariffs confrontation with USA as an opportunity in difficulties by reshaping positively its attitude towards trade and business by enhancing competitiveness in the world market and engaging diplomatically with other nations.  Strategic agility, domestic resilience, and global partnerships will be key to sustaining growth in a turbulent trade environment.   

Steadfastness in the face of trouble is the hallmark of a really great and an admirable man and it is a basic tenet throughout the Scriptures that God rewards diligence, faithfulness, endurance, and steadfastness. The admirable Indian Prime Minister leads this heritage nation with diligence, faithfulness, endurance, and steadfastness with true grit keeping the nation first and he is bound to win the war of tariffs imposed by Donald Trump on India.