India is facing a situation of great difficulty. Today, it is working to figure out how best to respond economically to the U.S.’s recent barrage of high tariffs. In retaliation, India retaliated against the US with tariffs on 28 US products. Among these were high demand products like almonds and apples. The stakes are high for India’s democracy and economy. An immediate loss of $35 billion in exports to the US (at the extreme end of the spectrum) would hurt deeply in an economy in which US exports account for roughly 6% of GDP.
Given that these trade tensions still continue, there are fears of long-term economic impacts for India. Long-term tariffs as high as 50% would result in India’s GDP being lowered by as much as 0.8%. This new forecast should be alarming to policymakers. Now India’s goods exports to the US have shot up to $86 billion. This figure is almost three times higher than the US’s exports to India, underscoring the US’s significant economic dependence on this bilateral trade relationship.
In response to the tariffs, India has orchestrated a carefully planned geopolitical strategy to convey its displeasure towards the US. The Indian government has recognized the need to diversify its export markets to mitigate risks associated with its heavy reliance on the American market. Today, this diversification strategy is considered a necessity rather than an option, with requests for India to ramp up its efforts “on a war-footing.”
India has initiated various diplomatic engagements aimed at strengthening ties with other nations. It has promoted rapprochement with China and is deepening economic partnerships with nations like Mexico and Canada. India and the European Union are well on their way to ratifying a free trade agreement. At the same time, they concluded a detailed trade treaty with the UK in July.
“India should wait at least six months to assess the full extent of US actions—not just the 50% tariffs but also any additional measures that may follow, given the unpredictability of Trump and his advisers,” said Ajay Srivastava of the Delhi-based Global Trade Research Initiative.
Though some experts call for restraint, others warn that retaliation may be too expensive وأنه not within the US’ best interest. Ashley Tellis, an influential analyst and thinker, once said about his profession. “Retaliation is a very costly and counterproductive strategy,” he said, adding that “at the end of the day, India needs us much more than we need them. These kinds of sentiments indicate the prevailing nervousness in India’s economic circles.
This is a formidable challenge for Indian exporters. They need to not only search for new, international markets, they need to build entirely new customer relationships in areas where they once had minimal or no foothold. Srividya Jandhyala, who worked for small businesses, emphasized how hard it is for individual exporters to find new customers. It’s a hard hill to climb, particularly in markets where they don’t have pre-established partnerships, customer bases or relationships. This viewpoint reveals the risks that such businesses must assume in the effort to turn off proven trade routes.
Beyond immediate trade concerns, analysts emphasize that India must cultivate a coalition of diplomatic partners who share its concerns about the US tariffs. Kaushik Basu articulated this need succinctly: “cultivate economic and diplomatic ties with countries like Mexico, Canada, and China. This means strengthening trade and cooperation with other governments concerned about the impact of Trump’s tariffs, particularly in Europe and Latin America.”
As India now considers what comes next, it finds itself at an inflection point, which could further define and protect its economic future. The balancing act includes both retaliation in the short term and strategic allies and diversified markets in the long term.