Despite pressure, India stays firm on not scaling back tariffs on imported goods
While India supports free trade to enhance bilateral trade, it has cautioned against lowering tariffs indiscriminately, especially in key domestic sectors. Such a measure is fraught with severe economic repercussions, potentially triggering a recession
India has not buckled under US pressure to alter its tariff policy towards Trump’s America, contrary to what some media reports would like us to believe. In fact, India firmly refuses to bow to US pressure on tariff reductions.
In a clear rebuttal to President Donald Trump’s claims, Commerce Secretary Sunil Barthwal has categorically informed a parliamentary panel that India has not agreed to cut import duties on American goods. This stance contradicts Trump’s assertion that New Delhi has pledged significant tariff reductions, highlighting a widening gap between political rhetoric and ground realities.
Thus, Trump’s claim that India has agreed to reduce tariffs appears to be exaggerated or, at the very least, premature. While there have been some reductions on specific goods like motorcycles and bourbon whiskey, Indian officials have made it clear that no broad tariff reduction agreement has been finalised.
India’s trade policy remains rooted in balancing liberalisation with strategic protectionism. While the country supports free trade to enhance bilateral commerce, Barthwal has warned that indiscriminately lowering tariffs —especially in key domestic sectors — could have severe economic repercussions, potentially triggering a recession. New Delhi prefers a calibrated approach, negotiating tariff reductions only where national interests remain safeguarded.
Meanwhile, China continues to counter US tariffs through a combination of economic diversification, diplomatic maneuvers, and domestic reforms. It has adopted a “Dual Circulation” strategy, focusing on strengthening domestic consumption while maintaining its export dominance. By aggressively expanding trade partnerships across Southeast Asia, the EU, Latin America, and Africa, China is effectively reducing its reliance on the US market. The Regional Comprehensive Economic Partnership (RCEP) plays a pivotal role in securing alternative trade avenues.
China is also leveraging the Belt and Road Initiative (BRI) to create new economic dependencies, ensuring sustained demand for its exports. Financially, it is pushing for yuan internationalisation and promoting the digital yuan to reduce reliance on the US dollar in global trade.
In retaliation to US tariffs, China has imposed counter-tariffs on politically sensitive American exports such as soybeans and LNG, pressuring US businesses and farmers to lobby against Trump’s trade restrictions. At the same time, it is offering tax incentives, subsidies, and regulatory relaxations to attract foreign companies, reinforcing its position as a global supply chain hub. To further strengthen its position, China is deepening economic and strategic ties with Russia, Iran, and BRICS nations, creating alternative economic frameworks that bypass Western dominance.
Strengthening domestic consumption and enhancing manufacturing self-sufficiency remain critical. Diversifying trade partnerships and accelerating free trade agreements, particularly in emerging markets, will help mitigate the impact of US protectionism. India must also push for financial independence by increasing trade settlements in rupees and reducing reliance on the dollar.
Additionally, technological self-sufficiency in key sectors such as semiconductors, AI, and electric vehicles must be a priority. Fast-tracking initiatives like the Production-Linked Incentive (PLI) scheme will help attract investments and reduce dependency on imports. At the same time, India should leverage its geopolitical position to attract companies seeking alternatives to China under the China+1 strategy. Strategic retaliatory tariffs, if required, must be implemented cautiously to avoid escalation while ensuring protection for domestic industries.