Donald Trumpโs second administration has wasted little time in fulfilling his campaign promise to wage a trade war against the world. On what he bombastically dubbed โLiberation DayโโApril 2nd 2025โthe president announced steep tariffs affecting more than 180 countries, combining a 10% baseline tariff with additional โreciprocalโ charges supposedly set at half the rate that other countries levy on American products. And Mr Trumpโs tariffs shook the world, including India.
"I, DONALD J. TRUMP, President of the United States of America, find that underlying conditions, including a lack of reciprocity in our bilateral trade relationships, disparate tariff rates and non-tariff barriers, and U.S. trading partnersโ economic policies that suppress domestic wages and consumption, as indicated by large and persistent annual U.S. goods trade deficits, constitute an unusual and extraordinary threat to the national security and economy of the United States. That threat has its source in whole or substantial part outside the United States in the domestic economic policies of key trading partners and structural imbalances in the global trading system. I hereby declare a national emergency with respect to this threat. (sic)" (Presidential Declaration)
For India, the result of Mr Trumpโs tariffs was devastating: a 26% tariff on its exports to America, higher than those imposed on the European Union (20%), Japan (24%) and South Korea (25%), though not as punitive as the 54% slapped on China. The tariffs represent a significant setback for Indiaโs trade relations with the United States and raise uncomfortable questions about Prime Minister Narendra Modiโs strategy of personal diplomacy with Mr Trump.
Strangely, while world leaders rushed to condemn Mr Trumpโs tariffs and announce countermeasures, Mr Modiโs government has maintained a conspicuous silenceโan approach shared only by Israelโs Benjamin Netanyahu and, to a lesser extent, Italyโs Giorgia Meloni.
Market meltdown, sectoral shock follow Trumpโs tariffs
The immediate reaction to Mr Trumpโs tariffs announcement was predictably negative. In the first trading session after the news broke, the BSE Sensex dropped over 500 points, while the Nifty50 declined below 23,200 within 15 minutes. Gift Nifty fell by 1.5%, and the rupee weakened against the dollar, hovering around 85.69 amid the market volatility.
The impact across sectors has been uneven. The pharmaceutical industry, which contributes about $12.2bn to Indian exports to the US, has temporarily escaped tariffsโa reprieve for companies like Syngene, Gland Pharma and Dr Reddyโs, which derive 68%, 54% and 43% of their revenues from the American market respectively. The Nifty Pharma index increased by 2.73% after the announcement, reflecting this temporary relief.
โExcept as otherwise provided in this order, all articles imported into the customs territory of the United States shall be, consistent with law, subject to an additional ad valorem rate of duty of 10 percent. (sic)โ
Donald Trump
Less fortunate is the automotive industry, which contributes around 3% of Indiaโs overall exports to the US. โA blanket tariff of 26% is expected to impact demand and also the competitiveness of Indian automobile exports in the American market, which can have a cascading effect in terms of higher production costs, lay offs and supply chain challenges,โ Macquarie reported. The Nifty Auto index consequently dropped by 0.64%.
The information technology sector fared worse still, with the Nifty IT index tumbling by over 3% as fears of an American recession and cutbacks in discretionary spending loomed large. Analysts have downgraded the sector to equal-weight based on increasing US recession risks.
Other major export categories likely to be affected include machinery (15.6% of exports to America), gems and jewellery (11.5%), machinery for nuclear reactors (8.1%) and refined petroleum products (5.5%). Macquarie estimates that the combined effect could shave 50 basis points off Indiaโs GDP growth.
Strange bedfellows: Netanyahu, Modi and silence
While most world leaders were quick to condemn Mr Trumpโs tariffs and announce retaliatory measures, Mr Modi has maintained a conspicuous silenceโeven as his commerce minister, Piyush Goyal, returned empty-handed from Washington following the prime ministerโs much-hyped February tour.
The Israeli prime minister, by contrast, moved quickly to exempt American imports from tariffs. โToday we cancelled all of the customs duties levied on products from the US, Israelโs largest trading partner,โ Mr Netanyahu wrote on X (formerly Twitter). โIn addition to the advantages to the market and to citizens of Israel, the current effort will allow us to further strengthen the alliance and ties between Israel and the US.โ
Today we cancelled all of the customs duties levied on products from the US, Israel's largest trading partner.
โ Benjamin Netanyahu โ ืื ืืืื ื ืชื ืืื (@netanyahu) April 1, 2025
Cancelling the customs duties on American goods is an additional step in the policy that my governments have led for a decade in opening up the market to competition,โฆ
This eager compliance is perhaps less surprising given that Israel receives billions of dollars in American aid annually. India enjoys no such largesse, making Mr Modiโs acquiescence all the more puzzling.
The contrast with other world leaders could hardly be starker. European Commission President Ursula von der Leyen announced that the EU was โalready finalising a first package of countermeasuresโ and โpreparing for furtherโ action.
Chinaโs Commerce Ministry โfirmly opposesโ the tariffs and โwill resolutely adopt countermeasuresโ.
Japanese Prime Minister Shigeru Ishiba questioned whether it โmakes sense to apply uniform tariffs to all countriesโ and put โall options on the tableโ.
Canadian Prime Minister Mark Carney vowed to โprotect our workersโ with a 25% tariff on American vehicles.
Even Ms Meloni, a stalwart Trump ally, called the tariffs โa wrong approachโ and pledged to โdo everything we canโฆ to prevent a trade war that would inevitably weaken the West.โ
Asian alliance against Trumpโs tariffs without India
Perhaps most tellingly, Indiaโs absence was conspicuous at a recent economic dialogue between South Korea, China and Japanโtheir first in five years. The three export powerhouses met on March 30th, just days before Trumpโs announcement, to โclosely cooperate for a comprehensive and high-levelโ free trade agreement to promote โregional and global tradeโ.
This Asian alliance, formed specifically to counter American protectionism, might once have seemed a natural fit for India. Yet Mr Modi appears more interested in placating Mr Trump than in joining forces with regional partners.
During his February visit to Washington, the Indian prime minister went so far as to plagiarise Mr Trumpโs โMake America Great Againโ slogan, proposing a โMake India Great Againโ initiative while promising greater Indian purchases of American goods and services, as well as more Indian investments to create jobs in the United Statesโpeculiar priorities given Indiaโs high unemployment rate.
Path not taken
As Mr Trumpโs tariffs begin to bite, Indiaโs options for response appear limited by Mr Modiโs reluctance to challenge his American counterpart. While the impact might not be catastrophicโIndiaโs exports in the most vulnerable sectors amount to only 1.1% of its GDPโthe tariffs will certainly hit high-export sectors, reduce Indiaโs foreign exchange earnings and potentially create problems for its balance of payments, especially for oil imports.
This vulnerability is exacerbated by Mr Modiโs refusal to support the BRICS nationsโ push for trading in local currencies, which would be a significant step towards de-dollarisation. His reluctance forces Indian businesses to pay a heavy price amid high economic stagnation.
Unlike Mr Netanyahu, whose strategic embrace of Mr Trump brings tangible benefits in the form of American aid and diplomatic cover, Mr Modiโs silence appears to secure nothing but the most ephemeral of rewards: photo opportunities and fleeting praise from a notoriously fickle American president.
As global leaders from London to Beijing formulate their responses to Trumpโs trade war, the Indian prime ministerโs unusual acquiescence raises uncomfortable questions about the price of his personal diplomacyโand whether Indiaโs economic sovereignty is being traded away for a pat on the back.
In the court of global public opinion, Mr Modi now finds himself in the peculiar company of Mr Netanyahuโcelebrating Mr Trumpโs tariffs while everyone else condemns them. The difference, of course, is that, unlike Mr Netanyahu, Mr Modi receives no American largesse to offset the economic pain. Mr Modiโs silence on Mr Trumpโs tariffs speaks volumes about his priorities, as Indiaโs businesses and consumers prepare to pay the price.
East Post is an independent geopolitical analysis portal covering South Asia and global power dynamics for international audiences. Views expressed are analytical and do not constitute endorsement of any state or non-state actor.
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