India is strategically placed to diversify exports towards dynamic, fast-growing markets, reducing reliance on a single partner. Its calm yet firm response to unfair US tariffs strengthens India’s position in future negotiations. With multiple alternatives, India holds leverage to expand its global trade trajectory significantly in the coming times.
The 21st-century global economy is witnessing a renewed rise of tariffs as instruments of power and policy. Once regarded primarily as protective tools for domestic industries, tariffs have increasingly become bargaining chips in the larger arena of international politics. The recent US–India tariff conflict of 2025 is a live example of this trend. The USA’s decision to impose a 50 percent duty on Indian goods has not only threatened to weaken India’s export growth but also signalled a shift toward a more turbulent and transactional phase in global trade.
The US–India tariff conflict
The seeds of the present conflict were sown earlier in 2025 when the Trump administration announced a series of tariff increases against Indian imports. Initially, a baseline tariff of 10 percent was imposed in April, followed by reciprocal duties that raised the level to 25 percent by early August. On August 27, however, US doubled down with another 25 percent increase, bringing the total tariff rate on most Indian goods to an unprecedented 50 percent and above. For comparison, Chinese goods faced only a 30 percent duty, while Vietnam and the Philippines were taxed at 20 percent. India, alongside Brazil, emerged as one of the hardest-hit partners in the recent phase of trump tariffs. The stated reason behind this escalation was India’s continued purchase of discounted Russian oil. According to USA, these purchases indirectly helped finance Russia’s war in Ukraine.
Economic consequences for India
With exports to the US valued at USD 87 billion in 2024, more than half of this amount became vulnerable to the new tariff regime. Sectors such as textiles, gems and jewellery, leather, marine products, and chemicals bore the brunt. The impact was particularly acute for micro, small, and medium enterprises (MSMEs). These firms dominate labour-intensive export sectors like textiles and leather, and their competitiveness relies heavily on cost advantages. A 50 percent tariff effectively priced them out of the American market, allowing competitors in Vietnam, Bangladesh, and China to capture US buyers. India’s bilateral trade with the US had been growing rapidly, touching $190 billion in 2024, with India emerging as one of America’s largest trading partners.
Global parallels and comparative cases
The US in 2025 deployed tariffs as a broad-spectrum tool against multiple trading partners. Brazil, like India, faced 50 percent duties amid political disputes. Canada saw its tariff rate raised to 35 percent, despite being part of the USMCA agreement. These variations underline a key feature of contemporary tariff wars: they are less about consistent trade principles and more about bargaining leverage. Nations that could strike deals or offer strategic concessions secured lower tariffs, while others who resisted US demands paid a higher price. The India case was particularly illustrative of how non-economic issues—such as energy sourcing from Russia—could become the decisive factor in tariff policy.
Winners and losers in tariff conflicts
Tariff wars inevitably create winners and losers, often in unpredictable ways. Competing exporters from Vietnam, Bangladesh, and Turkey gained a foothold in the US market. India’s labour-intensive export sectors will face challenges and consumers in the US will also witness high costs in the form of higher prices for imported goods, from clothing to seafood. Global supply chains, already disrupted by the pandemic and the Ukraine conflict, encountered further instability. The losers were not confined to national borders; the ripple effects extended to workers, businesses, and consumers worldwide.
India’s strategic response
Faced with these challenges, India adopted a cautious yet multi-pronged response. It engaged the US in negotiations, with both sides expressing optimism that a deal could eventually cap tariffs at 15 to 20 percent. Sensitive issues like agriculture and dairy remained stumbling blocks, as India was unwilling to expose its small farmers to foreign competition. Economically, India sought to diversify its export markets. Russia, Brazil, the European Union, and African nations were identified as alternative destinations for Indian goods. The BRICS grouping offered platforms for expanding South-South trade. However, replacing the vast US market is no easy task, and diversification remains a long-term rather than an immediate solution.
The future of trade in a fragmented world
The tariff wars of the 2020s mark a turning point in global economic governance. The liberal multilateral system that prevailed for decades is giving way to a fragmented order shaped by power politics. Multipolar trade architecture is emerging, with countries increasingly relying on regional alliances, bilateral deals, and South-South cooperation. Technology and digital trade represent another frontier. Unlike physical goods, digital services are less exposed to tariffs, providing a cushion for economies like India that have strong IT exports. The future may thus see a bifurcation: while manufacturing trade becomes vulnerable to tariff wars, digital trade expands relatively unhindered. Supply chains, too, are undergoing transformation. The emphasis is shifting from efficiency to resilience. Companies are diversifying sourcing to avoid tariff-prone geographies, leading to the rise of “friend-shoring” and regional production networks. While this reduces vulnerability to sudden tariff shocks, it may also fragment the integrated global economy built over the past three decades.
Conclusion
The imposition of 50 percent tariffs on Indian exports by the United States in 2025 is more than a bilateral trade dispute. It is a microcosm of a larger transformation in global commerce. Tariffs today function simultaneously as barriers to trade, bargaining tools in negotiations, and battle strategies in geopolitical rivalries. The US–India clash illustrates how economic policy is inseparable from political strategy in turbulent times. For India, the challenge lies in weathering short-term economic pain while building long-term resilience through diversification, innovation, and domestic strengthening. For the US, the question is whether punitive tariffs truly advance strategic goals or undermine partnerships with key allies.
Ultimately, the global trading system is entering a new era where certainty is scarce and turbulence is the norm. Nations that adapt swiftly, maintain flexibility, and strike a balance between sovereignty and interdependence will be best placed to thrive. Tariffs, once tools of protection, are now weapons in a battle for influence. In such turbulent times, the contest over barriers and bargains will define not just trade, but the future shape of the world economy.
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