Trump’s new tariffs spark global trade uncertainty
The tougher and unprecedented reciprocal tariffs announced by President Donald Trump on April 2, 2025, have not only heightened trade barriers between the United States and its global partners but also unleashed a wave of uncertainty across international markets. In a move long anticipated by analysts globally, the Trump administration unveiled a sweeping tariff policy, a 10% baseline on all imports and significantly higher rates for key trading nations. Global markets responded with immediate declines, reflecting fears of prolonged trade disruptions and inflationary pressures.
India, one of the fastest-growing major economies, was hit by a 27% duty on all its goods imported into the United States. It happened despite India’s efforts to reduce select tariffs on U.S. imports ahead of Modi’s February visit to the White House. With the US-India trade deficit rising to over $45 billion in 2024, Trump’s “America First” approach collided directly with Modi’s own “India First” doctrine.
According to the White House, the rationale behind the 27% includes concerns over tariff and non-tariff barriers, including allegations of currency manipulation. A formal statement declared that these worldwide tariffs would remain in place until “the threat posed by the trade deficit and underlying non-reciprocal treatment is satisfied, resolved, or mitigated.”
The longstanding rapport between Trump and Modi was believed to soften the blow on India. However, the tariff rate of 27% for India, though lower than the 34% on China (on top of a prior 20%) and the 46% slapped on Vietnam, underscores Trump’s commitment to systemic restructuring of US trade relationships. Notably, India’s flagship export sectors, such as IT services, pharmaceuticals, and automobiles, remain insulated for now; not subjected to additional product-specific duties.
India, for its part, has responded with a mix of diplomatic engagement and policy recalibration. In a joint statement following the Trump-Modi meeting in February, a decision was made to reduce tariffs on select US products and expand market access for American agricultural goods. Both sides agreed to work toward a comprehensive trade agreement by the fall of 2025.
Subsequently, India’s Commerce Minister Piyush Goyal visited the US in March. It helped lay the groundwork for ongoing negotiations. India has signaled further willingness to reduce import duties on US goods, including LNG and agricultural commodities. These moves are viewed as attempts to cushion the blow to its own exporters, particularly in sectors like gems and jewelry, pharmaceuticals, and auto parts. Reuters recently reported that India is considering tariff reductions on up to $23 billion worth of US imports.
Despite these efforts, the Trump administration remained unmoved and undeterred. Trump is driven by the belief that tariffs are essential tools to correct structural imbalances and incentivize domestic production. Who knows what and how well he knows and can anticipate the future? In the case of India, its currency (rupee) weakened in the non-deliverable forward market following the tariff announcement, reflecting investor anxiety and heralding inflationary pressures via costlier imports. It was a similar blow to other trade partners, big or small, worldwide.
Still, not all sectors may suffer equally in India. For example, its agricultural exports, such as seafood and rice, could retain a competitive edge, as competitors like Vietnam and China now face even steeper US tariffs. This relative advantage might help mitigate export losses in the near term.
Politically, the tariffs represent a stress test for US-India relations. While the two nations share deepening strategic interests, including defense cooperation and counterbalancing China, the imposition of high tariffs introduces friction into what is otherwise a steadily warming alliance. In a symbolic gesture during the press conference, Modi referred to his “Make India Great Again (MIGA)” initiative, drawing inspiration from Trump’s MAGA slogan. Modi even coined a term: “MEGA Partnership.” The AI (Artificial Intelligence) being central to MEGA, this author went a step further, calling the partnership the MAIGA Partnership.
While India is not alone in the Trump’s Tariff war, looking ahead, India must continue to engage diplomatically to manage the fallout. Offering reciprocal tariff reductions, streamlining digital tax policies (such as the abolition of the 6% “Google tax”), and strengthening regulatory transparency could help India secure a more favorable deal. Additionally, increased domestic manufacturing and diversifying export markets may cushion against US-centric tariffs.
The Trump tariffs pose both a challenge and an opportunity for India and the world (including the US). The tariffs may fulfill self-conceived prophecies to ‘Make America Great Again,’ but at what cost of human suffering? For India, the tariffs may temporarily disrupt its path toward becoming the third-largest global economy, but they should accelerate the country’s shift toward self-reliance, strategic economic alignment, and policy modernization.
Predicting the future is never a good bet, but change is inevitable. The people are resilient to weather the “tariff” storm and any consequential economic stagnation over time. What is certain, however, is that India’s response—strategic, measured, and forward-looking—will shape not just its trade ties with the US but its standing in the evolving global order.
Let the mantra, “Modi he to Mumkin he” work magically to get India out of the economic distress caused by the tougher Trump’s tariffs. Let us also hope that the tariff storm will pass without derailing Modi’s goal of India becoming a “developed nation” by 2047.
Note:
1. Text in Blue points to additional data on the topic.
2. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.
3. The author used Chat GP’s assistance for final editing and articulating his personal thoughts.
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Formerly, a researcher in Italy, Japan, and France, he has widely travelled and came to the US in 1978. He was a faculty and academic administrator in several different universities in PA, TX, NJ, MN, WI, and NY, and an Executive Fellow in the White House S&T Policy during the Clinton administration.
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