India must Hold the Line as Trump’s Tariffs Loom

02/08/2025

The latest salvo in the global trade skirmish comes from Washington, as the Trump administration readies tariffs that will impact less than half of India's exports to the United States. While the limited scope of the tariffs may appear to be a reprieve, the geopolitical undertones are far more complex-and demand a measured yet firm response from New Delhi. At the heart of the issue is India's removal from the U.S. Generalized System of Preferences (GSP), a preferential trade scheme that benefited Indian exporters by providing duty-free access to the American market for over 3,000 products. The Trump administration's decision, ostensibly to protect American producers and address trade imbalances, directly affects Indian exports across sectors such as textiles, jewelry, and auto components.
Yet, it's crucial to note that less than 50% of Indian exports to the U.S. will be impacted by these tariffs, with pharmaceuticals, IT services, and petroleum products-India's heavyweight export categories-still largely unaffected. This gives India both room and leverage in ongoing trade negotiations. Talks are on, and while India has shown a willingness to engage, it has also drawn a clear line when it comes to agricultural and dairy imports. The U.S. has pushed aggressively for greater market access in India for its agricultural goods and dairy products. But for India, these sectors are not just economic pillars-they are deeply entwined with rural livelihoods and national food security. Any compromise here risks undermining the fragile ecosystem that supports millions of Indian farmers and dairy producers. The demand, for instance, that India accept dairy imports from cattle fed on non-vegetarian diets has religious and cultural implications that go beyond trade policy.
India's refusal to yield ground on agriculture and dairy is not protectionism; it is pragmatic self-preservation. Just as the U.S. shields its own farmers with massive subsidies and trade barriers, India is right to prioritize the well-being of its rural population. What's needed now is a recalibration of trade ties based on mutual respect and realistic expectations. India must continue to push for a fairer deal-one that recognizes its developmental priorities and the asymmetry in its trade relationship with the United States.
In the broader context, these tensions also highlight the vulnerability of export-driven growth models dependent on a single large market. This should serve as a wake-up call for India to diversify its export destinations, deepen trade ties within Asia, Africa, and Europe, and focus on building domestic competitiveness. Trade diplomacy under President Trump has been erratic, transactional, and heavily tilted toward short-term political gains. India must remain engaged, but not at the cost of strategic sectors or national interest. The tariffs may sting, but they are far from crippling. India has shown maturity by keeping the dialogue open while firmly defending its red lines. This balance of pragmatism and principle is the right course-and it must be sustained.

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