Treat Trump As A Blip, Think Long-Term On India-US Relations

His vilification of Ukraine’s President Volodymyr Zelenskyy is a case in point. After ambushing him in the White House in full media glare, Trump went on to reverse course and is now supplying military equipment to Ukraine while threatening Russia.

Having now trained his guns on India, Trump has warned that buying oil from Russia will attract even higher tariffs. The immediate rejoinder from New Delhi has been both sharp and measured — pointing out that both the EU and the US have continued trade with Russia, even though it's “not even a national compulsion" for either. India has also noted that all necessary measures will be taken to safeguard India’s national interests and economic security.

These developments highlight the irrationality of Trump’s policies in recent days. Given this background, New Delhi should have been prepared for a heavy-handed reaction after it rebuffed Trump over his demand that India open up its agriculture and dairy markets. He must have felt India would be cowed by the threat of high tariffs and allow the US entry into these highly protected sectors.

In fact, US Commerce Secretary Howard Lutnick publicly declared that India will have to open up its agriculture sector if it wants a trade deal. Indian negotiators did not take him seriously, given that even the WTO has taken note of the concerns of millions of India's farmers.

Even without the Russian penalty, Trump's retaliation — 25 per cent tariff — is bad news, as it covers all products without exception, including pharmaceuticals and electronic goods that had earlier been kept out of the higher tariff bracket.

Impact Of US Tariffs On Indian Export Sectors

Pharmaceuticals and electronic goods account for up to US$ 20 billion of the US$ 86 billion of merchandise India exports to the US. These figures sound alarming, resulting in the agonising over the failure of PM Modi’s foreign policy among Delhi's chatterati right now.

But this is the time to take a step back, take a deep breath, and review the situation. Firstly, the pharmaceuticals being exported are in the generics category, and India is the main supplier of these drugs. It would be difficult for the US to replace these in the short term, so they will likely retain their competitive edge.

As for electronics, especially iPhones, Apple is undeterred by the tariffs and is continuing to invest heavily in India. Their feeling is that, compared to manufacturing their products in the US, manufacturing them in India will remain cheaper, despite the tariffs.

Secondly, it is expected that these tariffs will bring down GDP growth rate for FY26 by 20-30 basis points from the estimated 6.5 per cent — the range that investment agencies like Goldman Sachs, Nomura and Barclays have put out. Most of them believe the domestic orientation of the Indian economy will ensure a muted effect on overall growth.  

Thirdly, Trump’s comments about India and Russia being “dead economies” are bound to fall on deaf ears at a time when both countries have managed to stave off the impact of geopolitical tensions. Russia’s economy may be slowing down now, but it has been on a relatively stable course despite Western sanctions.

Expected Impact On The Indian Economy

As for India, there is little to be said considering that even the International Monetary Fund (IMF) has just raised growth estimates for FY26 to 6.4 per cent, keeping India in the fastest-growing large economy in the world bracket for yet another year.

The way forward for India is therefore clear. It should not allow itself to get bogged down in retaliatory fire against the spate of tweets and comments by the Trump administration. Instead, a long-term approach should be taken on the India-US relationship, whether on the strategic or economic front.

There is no doubt that the US is a powerful strategic partner. India should not allow the past two decades of deepening ties to go to waste by the short-term temper tantrums of one incumbent US President. 

The bilateral economic and trade relations are also stronger than with any other country. The present administration may be fulminating, but chief executives of leading US corporations have placed their bets on the success of the India story. Recent reports show that American corporations are gearing up for higher investments as the enormous domestic market is seen as a brightening growth arena. 

The role of the Indian diaspora in India-US ties also cannot be wished away. The fact that iconic US firms like Alphabet, Microsoft, Adobe, IBM, and Starbucks have Indian-origin CEOs is a powerful reminder of the intellectual strength of the community.

It is in this context that one must view the imposition of high tariffs on Indian goods exported to the US. It is surely a concern that these are affecting the country’s biggest export market.

Nevertheless, New Delhi must forge ahead with negotiations for a long-term trade treaty. It must set aside the distractions of a commentary that obscures the real issues.