Get trade savvy: India must sharpen its policy calculus in an era of US protectionism

Negotiations will now proceed sector-by-sector, focusing on market access, tariff barriers and supply chain integration. Yet, the 'Liberation Day' tariffs of 27% make it clear that the US is setting the terms, using protectionist levers to shape the deal in its favour for its economic nationalism.

Also Read: Trade war: Trump’s shock-and-awe tariffs only have a faint silver lining for India

One is reminded of the famous line from the movie The Godfather: “You come to me on this Liberation Day and ask me for a trade deal?" It captures the irony of the US imposing tariffs while negotiating a trade agreement. It’s also the playbook of empires and explorers who set sail under the guise of discovery only to redraw trade routes in their favour.

Much like ancient invaders who landed on new shores, proclaimed newfound dominion and extracted wealth under the pretext of civilizational progress, this modern-day economic conquest is about securing an advantage on America’s terms.

To achieve this, whatever is needed as a strategic bargain, including visa access, regulatory licensing or easing imports for American interests, will be on the table.

For India, the US has long been a critical trade partner, a destination that absorbs everything from pharmaceutical formulations to automotive components, textiles and engineering goods. The deep economic interdependence between the two nations, underscored by high bilateral trade, faces an inflection point.

The imposition of punitive tariffs will not merely recalibrate price competitiveness, but could also trigger a reassessment of supply chains, market dependencies and future trade architectures.

Unlike China, which has historically met American trade aggression with retaliatory countermeasures, India’s response must be tempered by its broader strategic calculus.

Also Read: Indira Rajaraman: US Liberation Day tariffs target the WTO’s playing field

The Indo-Pacific security architecture, growing technological cooperation and mutual geopolitical interests necessitate a more sophisticated negotiation strategy that transcends immediate retaliatory impulses. Yet, the economic realities of Indian exports cannot be ignored.

In the new ‘America-first’ world that Trump 2.0 seeks to build, one that is seeing rules-based engagement being rewritten, India must balance its trade position with the US while ensuring its economic sovereignty, which requires finding new export markets.

The risk is not merely one of tariffs, but of a structural shift in trade relations where unilateralism is normalized. So India must go beyond reactive policymaking.

Diplomatic engagement is expected to be the primary recourse. Sectoral exemptions, tariff reductions on key Indian exports, or even a broader trade framework that acknowledges India’s distinct position in the global economic order must be pursued with urgency.

The engagement, however, must be pragmatic. Washington’s protectionist posture might turn into a structural shift that India must accommodate within its long-term economic plans.

However, outright escalation would be counterproductive, particularly given India’s aspirations to integrate its factories more deeply with global value chains and position itself as a trusted and non-disruptive trade partner. The exigencies of the moment also necessitate a diversification of trade patterns.

Also Read: Andy Mukherjee: Trump’s tariffs should push India to double down on reforms

While the US remains indispensable, an overreliance on any single market renders Indian exports vulnerable to geopolitical fluctuations. The acceleration of free trade agreements, particularly with the UK, EU, Eastern partners and emerging African markets must assume greater priority.

Equally, the domestic economic environment must be recalibrated to withstand external shocks. Perhaps increased production-linked incentives, enhanced trade facilitation mechanisms and cost rationalization within the export ecosystem are needed as safeguards against future protectionist waves.

If this is a test, the real stress lies ahead—not merely in trade, but in the race to control data, digital infrastructure and narrative-building technologies.

The next decade will be defined by a battle for digital influence and Western hegemonies will seek to entrench their dominance through regulatory, technological and policy levers.

India, as home to one-sixth of humanity and one of the world’s largest consumer economies, must recognize that American digital entities will demand greater access to the Indian market and seek less onerous licensing norms for an unchecked free ride.

How India structures its data governance, competition laws and digital infrastructure will be just as critical as tariff negotiations. To this end, having a bilateral access arrangement that’s mutually beneficial would be fair without ceding territory.

Also Read: Mint Snapview: Many countries will retaliate against Trump's tariffs. India must not.

If the Global Financial Crisis led to the Taper Tantrum, which sent shockwaves through India’s economy with capital flight, currency depreciation and inflationary pressures, we should now brace for a series of Trump-Trade Tantrums.

America’s increasingly unilateral and protectionist trade policy will test India’s economic resilience. Future rounds of trade coercion, market access demands and digital economy pressures are inevitable.

India stands at a crossroads not just in trade, but in shaping its economic destiny in a world where protectionism, digital dominance and geopolitical leverage are redefining global commerce.

Trump-Trade Tantrums will not be passing storms. They will leave a new economic order in their wake where strategic self-reliance must be backed by decisive and forward-looking policies.

India must build economic buffers, expand trade corridors and assert its digital sovereignty to ensure it is not merely reacting to external shocks, but actively shaping the global trade architecture in its favour.

The author is a corporate advisor and author of ‘Family and Dhanda’.