To conduct a comprehensive discussion on preparing a plan for the Government of India to counter Donald Trump's tariff war against India, the following key aspects should be covered:
## Background and Context
- Overview of the tariff war: Trump initially imposed a 25% tariff on many
Indian products and recently doubled it to 50% as a punitive measure for
India's continued purchase of Russian oil amid the global Ukraine conflict
- Impact on India-US relations: The tariffs are a significant setback in the
strategic partnership between the two countries, risking diplomatic and
economic ties
## Economic Impact on India
- Affected sectors: Garments, gems and jewelry, footwear, sports goods,
furniture, chemicals, textiles, leather products, food, and automotive sectors
are among the most hit
- Export threat: Around 70% of India's exports to the US are seriously
threatened, putting $48.2 billion worth of exports at risk and potentially
leading to job losses
- Competitiveness loss: The high tariffs reduce the competitiveness of Indian
goods in the US market compared to peers like China and Vietnam
## Government of India's Response
- Resilience strategy: Prime Minister Modi has emphasized self-reliance, tax
relief measures, and boosting domestic consumption ahead of key festivals
- Trade talks: India-US bilateral trade agreement negotiations are ongoing but
have stalled; no immediate sign of rollback from the US side
- Economic support plans: Considerations include a ₹25,000-crore Export
Promotion Mission, trade finance support, regulatory clarity, e-commerce hubs,
warehousing, and branding .
## Strategic and Tactical Measures
- Diversification of markets: Target new export destinations in Latin America,
the Middle East, the UK, and Japan to reduce dependence on the US market
- Supply chain resilience: Explore relocating production or sourcing to
tariff-favored countries or creating multi-source supply chains
- Setting up a "war room": For real-time monitoring and rapid
response on trade developments and alternative options
- Sector-specific reforms: GST revamp and support to labor-intensive industries
to stimulate domestic demand and cushion export losses
## Challenges and Negotiation Strategy
- Managing diplomatic fallout while protecting national interests.
- Addressing US demands around market access, particularly in agriculture and
dairy
- Balancing retaliation risks with global trade rules and long-term
relationships.
These points provide a comprehensive framework for discussion, covering the
tariff escalation, economic challenges, government countermeasures, strategic
adjustments, and diplomatic dimensions of the tariff war between India and the
US under Trump's administration
Which Indian export sectors will lose most revenue in
2025
The Indian export sectors expected to lose the most revenue in 2025 due to
Trump's 50% tariff war include:
- Textiles and Apparel: Exports to the US were $10.8 billion in FY 2025, with
tariffs rising from 13.9% to 63.9%, impacting major clusters such as Tiruppur,
Noida-Gurugram, Bengaluru, Ludhiana, and Jaipur. This sector faces significant
loss of competitiveness to countries like Bangladesh and Vietnam.
- Gems and Jewelry: Indian exports to the US were $10 billion, with tariffs
surging from 2.1% to 52.1%. This threatens jobs in Surat, Mumbai, and Jaipur,
important centers for cutting and polishing.
- Shrimp: Exports valued at $2.4 billion, with the US being the top market for
farmed shrimp. Tariffs could reach 60%, risking processing hubs in Andhra
Pradesh.
- Carpets: Exports of $1.2 billion to the US face a tariff increase from 2.9%
to 52.9%, threatening livelihoods in Bhadohi, Mirzapur, and Srinagar.
- Handicrafts: $1.6 billion exports with a 40% US share, facing tariff hikes
risking closures in Jodhpur, Jaipur, Moradabad, and Saharanpur.
- Leather and Footwear: $1.2 billion worth exports to the US face full 50%
tariffs, affecting Agra, Kanpur, and Tamil Nadu's Ambur-Ranipet clusters.
- Agriculture and Processed Food: Exports worth $6 billion including basmati
rice, tea, and spices face a 50% duty, opening space for competitors like
Pakistan, Thailand, and Vietnam.
About two-thirds of India's exports to the US worth over $48 billion will be
impacted, causing severe revenue loss and job risks in these sectors. Major
exemptions include pharmaceuticals and electronics
India can consider several alternative trade partners to partially replace the US market amid the tariff war. Key alternatives include:
- ASEAN Countries, especially Vietnam: Vietnam is a rapidly growing manufacturing hub with competitive labor costs and favorable trade agreements, making it a strong alternative for electronics, textiles, and other exports
- European Union (EU): The EU is a large and diversified market with ongoing trade agreements (e.g., Mercosur-EU) and can serve as a cushion against US tariffs. Stronger EU ties could open opportunities in industrial machinery and manufactured goods .
- Middle East and Gulf Countries: These markets are emerging destinations for Indian exports such as textiles, gems, and food products, often with fewer trade barriers
- Latin America, including Mexico and Brazil: Mexico benefits from proximity and trade agreements like USMCA, while Brazil is expanding its trade footprint. Both have potential for certain Indian exports and as production hubs .
- United Kingdom and Japan: These developed, high-demand markets can absorb specific Indian exports like apparel and textiles .
- Russia and Central Asia: Including Russia as a trade partner is being explored given geopolitical shifts, albeit with trade and regulatory complexities .
While full replacement of the US market is unlikely, diversifying into these regions can mitigate losses and expand India’s global trade footprint amid tariff challenges
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