Bharat’s Strategic Position and Economic Resilience Amidst Tariff War

1. Friend to Foe: Why USA Changed its Outlook Towards India?

    There are many voices and critics who are constantly raising their concerns on Donald Trump’s Tariff policy. The question arises why USA is trying to alienate a strategic partner like India, as India has remained a pivotal partner. 

     Before getting into the further discussion it is important to understand the brief outline of the tariff war. Trump’s intentions for imposing tariffs were visible since 20th January, 2025 from the day when he acquired his seats. On 10th February, the USA announced a 25% tariff on Steel and Aluminium goods. Further on 12th February Prime Minister Narendra Modi visited the United States where both the leaders decided to raise their bilateral trade to $500 Billion by 2030. Recently the US imposed 50% tariffs on India from 27th August, 2025 as a penalty for buying Russian oil.

    Here comes a question that the USA, who was talking about increasing bilateral relations, soon started to treat India as its enemy. Is it just about India’s trade with Russia or there is something more to it?

1. Personal Interest of the President in Pakistan:

In a recent interview, Jake Sullivan said that India is a country that the US should be aligned with. He accused President Donald Trump of jeopardising America's ties with India to favour his family's business deals in Pakistan and called Trump's move to sacrifice the Washington-New Delhi’s relationship a "huge strategic harm"  to the United States' own interests. He quoted that, "Because of Pakistan's willingness to do business deals with the Trump family, Trump has thrown the India relationship over the side". 

In April, just five days after the Pahalgam terror attack that killed 26 tourists, Pakistan signed a preliminary deal with World Liberty Financial, a decentralised finance company 60 per cent owned by the Trump family, to boost blockchain technology. Interestingly, World Liberty Financial lists Trump as ‘Chief Crypto Advocate’, whereas the US president’s sons, Eric and Donald Jr, are ‘Web3 Ambassadors’, and Barron Trump as ‘DeFi Visionary’. A known US businessman Gentry Thomas Beach has been pushing for business deals in Islamabad and he is known to have close ties to the Trump family, namely Donald Trump Jr. The two of them met at the Wharton School of Business and regularly go hunting together. (Source: The FirstPost)

Even the US court has condemned the act of the President, So, why suddenly Pakistan is being transferred from a neglected ally to a “phenomenal partner” by Donald Trump, when in his last term he had accused Pakistan of offering the US “nothing but lies and deceit”? The answer lies in Pakistan’s unique geographical location bordering Iran, Afghanistan and China, which opens unprecedented opportunities for American intelligence agencies to launch operations to serve US’ strategic and economic interests in the region.

2. Trump’s Desire for Nobel Peace Prize:

The underlying cause behind the steep US tariffs on India seems to be New Delhi's refusal to allow President Donald Trump to mediate during the hostilities with Pakistan, effectively denying him an opportunity to trumpet his case for the Nobel Peace Prize. Trump has repeatedly claimed that he initiated a ceasefire between India and Pakistan during Operation Sindoor even as New Delhi has made it clear that there was no third-party mediation.

The report by Jefferies said Trump's "personal pique" was behind the US imposing an unprecedented 50% tariff on India, the highest among American trading partners, and thereby sending longstanding strategic ties into a free-fall. "Tariffs are primarily the consequence of the American president's personal pique that he was not allowed to play a role in seeking to end the long-running acrimony between India and Pakistan," the report said.

3. Increased Access in India’s Agriculture and Allied Sectors: 

Trade tensions between India and the United States have intensified, largely due to Washington’s persistent demands for reduced tariffs on major agricultural products such as corn, soybeans, apples, almonds, and ethanol, along with greater access to India’s dairy market. These issues have been at the heart of trade negotiations, as the US seeks to expand its presence in India’s vast agriculture and allied sectors. India currently imposes an average tariff of 39% on imported agricultural goods, in stark contrast to 5% in the US, and has steadfastly refused to lower these tariffs, citing the potential adverse impact on its millions of small farmers and dairy producers.

India is, however, resisting these demands as these will have a direct bearing on farmers. Prime Minister Narendra Modi already clarified his take, that India will never compromise on the interests of its farmers, fishermen and dairy sector, and declared he was prepared to bear a significant personal cost if necessary.  This is supported by economic evidence: According to a State Bank of India report and other policy analyses, allowing heavily subsidized US dairy and agricultural imports could trigger a 15% drop in domestic milk prices, resulting in annual losses of up to ₹1.03 lakh crore for Indian farmers. Such concessions would demand increased imports of up to 25 million tonnes, displacing local supply.

4. India on a Path of Becoming Aatma Nirbhar: 

Over the past several years, the Indian economy has exhibited remarkable growth, emerging as the fastest-growing major economy in the world. In fiscal year 2024–25, India’s real GDP recorded an increase of 6.5% indicating economic expansion across multiple sectors. This rapid development is supported by a combination of domestic demand, policy-driven reforms, and strong investment in infrastructure. A significant portion of the growth can be attributed to the secondary sector and the flourishing micro, small, and medium enterprise (MSME) segment, which collectively account for nearly 30% of India’s GDP and 46% of total exports. While the path to self-reliance is generating new opportunities for domestic expansion and global engagement, it also invites complex policy reactions from trading partners, highlighting India’s growing influence within the international economic environment.

This evolving landscape has resulted in international repercussions, particularly with the United States imposing significant tariffs reaching as high as 50% on Indian exports. The rationale behind these tariff hikes is tied to India’s shift toward self-sufficiency, which is expected to curtail American exports to the country and potentially affect US corporate profits. Thus, India’s transformation not only signals rising self-reliance but also generates strategic challenges as major economies respond to its emergence in global markets. As India is a huge market for many big economies and if it shifts towards self reliance then import of USA’s goods would reduce which will ultimately affect its profit and this is also one of a major reason for imposing tariffs on India.

    The reasons highlighted significant factors that lead to the increase in bitterness between New Delhi and Washington’s trade relations, but it is also fascinating to analyse and understand the counter actions and strategic decisions taken by the Indian Government for maintaining national integrity. 

II. India’s Strategic Move for Resilience: Is India expanding its wings?

    India after its Independence was always seen as a weak nation and it never happened that India put its relations on stake with the superpower America, but today the situation is something different. We are witnessing a very new perspective of India. India is seen joining hands with one of its major enemies China and even major economies like Germany and Russia are supporting India to increase their trade relations. Today India’s policies are far more dynamic and it shows the inherent spirit of Bharat, to bounce back and overcome the challenges. We will try to analyse few areas which shows economic resilience of India:

1. Rural Market’s Major Role in GDP Escalation:

Indian firms focus on rural areas for growth amidst the tariff concerns as the rural consumption has exceeded the urban consumption for six quarters. The major reason claimed for this is low inflation rates and good harvests that boasts the consumer expenditure. 76.6% of households reported a rise in consumption over the past year. Just 3.2% of households reported a decline in consumption, which is the lowest since this survey started (Source: PIB).

The new GDP projections, shows that private consumption surges to 61.4% of GDP in FY25. This year the rural private consumption played a major role in sustaining the economy as India has a significant population residing in rural regions as compared to urban areas which again plays an important role for protecting and sustaining the nation’s inner economy when there are so many uncertainties going on in the global economy.

2. Mission 40-Countermeasure to 50% Tariff: 

The Indian government’s first major countermeasure to the 50% U.S. tariff on Indian goods indeed involves dedicated outreach programmes in 40 countries. In response to the US tariff hike, India launched targeted outreach programs across 40 pivotal markets, particularly for the textile and apparel sectors, to mitigate losses and diversify export destinations. Countries include the UK, Japan, South Korea, and a range of other markets across Europe, collectively, these 40 markets import in textiles and apparel; yet India currently holds only 5–6% of that export market highlighting substantial growth potential. 

3. GST Rates Cut-Off: Reducing Burden on Consumers:

Recent GST reforms play a crucial role in helping the Indian economy balance the challenges posed by the ongoing tariff war with the USA. The government simplified the complex tax structure of Goods and Service Tax by reducing multiple slabs into two main rates, 5% and 18% with a special 40% slab on luxury items. This has significantly reduced tax rates on essential goods, household items, and consumer durables, thus lowering prices and boosting the purchasing power of consumers, especially among the middle and lower-income groups who form the backbone of domestic demand. By enhancing affordability and stimulating consumption, GST reforms effectively increase internal demand, which is critical as export sectors face higher tariffs in global markets. 

Moreover, the reforms exempt essential health and life insurance premiums from GST, further increasing disposable incomes and supporting household financial security. The timing of the reforms coincides with major festivities, which has higher consumer spending, thereby incentivising the economy.

    By deconstructing the past it was found that what are the reasons that led to the tariff war, besides that on scrutinizing the current trends it could be concluded that what kind of strategic response India is giving to the superpower, but what is interesting to unveil is that what would be the future outcome of this tariff war, can Asian countries become the next dominant power? Will Bharat be able to re-gain its stature?

III. Bharat Regaining its Stature of Global Leader?

    The imposition of tariffs by the USA is a result of President Trump’s long kept personal grudge and Bharat has clearly stated its stand that it would keep its nation’s integrity and sovereignty as priority, thus the government has started to take steps in that direction, so that it can mitigate the impact of tariff war on the industries of India. 

    Despite the imposition of steep US tariffs, reaching up to 50% on many Indian exports, India’s economy grew at a robust 7.8% in the first quarter of 2025. This resilience is supported by India's diversified trade portfolio beyond the US, strong domestic consumption, reforms, and government initiatives like "Make in India" and Atmanirbhar Bharat, which emphasize self-reliance and deeper integration into global value chains. Strategically, the tariff pressures have made India’s recalibration towards alternative trade partnerships such as China and Russia as the fight is against the Superpower and it is the need of the hour for India to diversify its bilateral trade. 

    These challenges have also introduced innovation in manufacturing, digital commerce, and services, where India holds competitive advantages, allowing it to transition from tariff-reactive to proactive rule-setting in emerging technological domains. While short-term risks include export declines in sectors like textiles and jewelry and a potential GDP impact estimated between 0.5% to 0.6%, nevertheless Bharat's strategic position amidst the tariff war exemplifies its economic resilience, reinforcing it as a global leader capable of navigating external shocks while advancing its national interests. 

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