India weighs response to Trump’s tariff salvo

In response to US President Donald Trump’s recent announcement of 25 per cent tariff on Indian goods, New Delhi is cautiously evaluating its next steps to mitigate the economic impact.

The tariffs, coupled with penalties linked to India’s trade ties with Russia, have prompted Indian officials to explore alternative trade strategies. According to a senior official, India is unlikely to retaliate immediately and will continue negotiations for a bilateral trade agreement aimed at easing tensions and maintaining momentum.

The proposed trade agreement, first announced in February, seeks to double bilateral trade to $500 billion by 2030. Formal negotiations began in March, with the goal of finalising the first tranche of the deal by October-November.

On March 29, both sides finalised the detailed Terms of Reference during the first round of discussions held in New Delhi. So far, five rounds of negotiations have taken place. The next round is scheduled for August 25, when a US delegation will visit India. Talks are expected to focus on agriculture, dairy, steel, aluminium and automobiles.

While the US is pushing for greater access to India’s agriculture and dairy markets, New Delhi remains cautious due to sensitivities.

According to Barclays, the final tariff rate may be lower than 25 per cent, as both sides continue to engage constructively on the trade deal.

To reduce its trade surplus with the US — estimated at $43 billion last year — India is considering increasing imports, including natural gas and communication equipment, from the US.

Meanwhile, trade experts remain divided over Trump’s tariff threat. Analyst Narendra Taneja said the move may be a pressure tactic, noting that there’s no official confirmation yet on whether an executive order has been signed to enforce the tariffs.

Experts also recommend diversifying India’s export markets. Congress leader Shashi Tharoor emphasised the need to strengthen trade ties with the European Union, the UK, Japan, ASEAN and the Global South to reduce dependence on any single market.

India has already signed a Comprehensive Economic and Trade Agreement with the UK, and discussions are underway with the EU, with both sides aiming to conclude a Free Trade Agreement by the end of this year.