US President Donald Trump’s announcement of a 25 per cent tariff on Indian imports, along with a penalty for procuring energy and military equipment from Russia, is a shocker at first sight. But, it also presents a moment for India to seize the initiative and do what is right without losing any more time. A free trade agreement that allows greater access for Indian products to the world’s largest market and, at the same time, opens up its economy to American goods and services, is a win-win for both sides. India’s exports to the US, at $86.5 billion in 2024-25 (April-March), were higher than those to any other country. Imports from the US, at $45.7 billion, were below only those from China ($113.5 billion), Russia ($63.8 billion) and the UAE ($63.4 billion). A no-deal, simply put, is not in India’s interest. The effort should be to not just preserve, but enhance the gains from trade.
Trump, no doubt, has overturned the predictable rules and principles governing the global trading order that delivered high growth and lifted the fortunes of millions across countries. His latest unilateral measure, subjecting India to a higher tariff than the UK (10 per cent), the European Union, Japan and Korea (15 per cent), Indonesia (19 per cent) or Vietnam (20 per cent), runs counter to the larger story of growing cooperation between the two countries. The last couple of years alone have seen significant movement towards the signing of a new 10-year defence partnership framework, an MoU to expand and diversify critical mineral supply chains and proposed amendments to India’s nuclear liability law. For all the jarring notes in Trump’s imperious actions and pronouncements, India must not lose sight of the big picture. If anything, it must hasten the process of clinching a long-delayed agreement that will also give a push to much-needed domestic economic reforms. And the approach should be based on export proactiveness rather than import defensiveness — as was evident in the recent India-UK Comprehensive Economic and Trade Agreement.
While Trump’s 25 per cent import levy may be a pressure tactic for forcing India to lower both duties and non-tariff barriers on American products, his threatening to impose an additional “penalty” for the country buying Russian oil and defence hardware is unacceptable. Just as signing a trade deal with the US is in India’s interest, securing the energy needs of its population — including by sourcing oil from any country offering crude at discounted prices — is non-negotiable. It is possible this may entail a cost in the form of secondary sanctions linked to Russian supplies, which India will have to factor in going ahead. Recognising this cost is as important as converting the Trump threat into an opportunity to be seized.
