Tariff Tug-of-War: India’s Long Game in U.S. Trade Frictions

Saif Ali

As part of the “America First” economic policy, U.S. President Donald Trump is once again escalating a global trade war, not just against traditional economic rivals like China, but also allies like India. This time, the U.S tariff plan appears to have effect on multiple countries, setting off a domino effect that could reshape global trade dynamics. 

India imposed tariffs on 28 U.S. goods in response to Trump’s tariff hike.

This isn’t the first time India and the United States have locked horns over tariffs, friction can be traced back to March 23, 2018, when Washington imposed 10% tariffs on Indian aluminum and a 25% duty on steel. Once again, the recurrence of a similar tariff cycle has raised concerns in New Delhi, with Trump announcing that India will face reciprocal tariffs starting April 2. Even though analysts refer to this move as a reaction to India’s unfair trade practices, the U.S. president has defended the tariffs as a mean of protect national security and domestic industries. But this statement is considered to be made to defend aggressive trade policies at the WTO in international trade negotiations. 

Traditionally Indian economy has relied on a mix of both domestic production and well-balanced imports for its industrial base, therefore, these tariffs gave rise to economic uncertainty in the country. In response, India imposed reciprocal tariffs on 28 key U.S. exports. This countermove by India was as much about sending a political message as it was about economic self-defense. This back-and-forth is emblematic of what many analysts see as a broader trend: in today’s interconnected economy, trade measures are as much about diplomatic signaling as they are about numbers.

With the dynamic shift in India-U.S. trade relations, India is recalibrating its trade strategy by forging new alliances to reduce long-term reliance on U.S as one of its major importers. Instead of engaging in a simple reciprocal tariff battle, India appears to be playing a long-term strategic chess game, where its enhancing its domestic production capacity through initiatives like “Atmanirbhar Bharat” to overcome it reliance on foreign imports, while on the other hand its looking to diversify its trade alliances with Europe, ASEAN, and the Gulf to secure its future trade interests.

“Atmanirbhar Bharat” is more than a slogan—it’s India’s strategic shift toward self-reliance and trade resilience.

Looking deeper, India’s long-term strategy translates into mitigating future shocks and shifting the economic balance in its favor. The government’s push for “Atmanirbhar Bharat” (self-reliant India) is not simply a populist slogan; it is a concrete policy effort to reduce dependence on imports, especially from countries that might use trade as a geopolitical weapon.

This idea of a self-reliant India suggests developing domestic manufacturing capacity through schemes like the Production-Linked Incentive (PLI) program, which offers financial incentives to companies in key sectors like electronics, pharmaceuticals, and medical devices. This could not only create jobs but also stabilize supply chains. So, if U.S. tariffs or other international trade barriers arise, there exists a stronger domestic base that will cushion the blow.

But why diversify away from the U.S. market altogether? Because over-reliance on any single market can be risky. Recent global trends suggest that rising geopolitical tensions and trade uncertainties has pushed nations to recalibrate their trade partnerships. For India, expanding trade ties with the European Union, the United Kingdom, ASEAN countries, and even the Middle East is a logical step. If the U.S. continues to be unpredictable in its tariff policies, India can switch more easily to markets that offer stable economic conditions. Other countries, like those in Southeast Asia, are closely observing how India maneuvers in this trade game and may follow suit.

These trade measures would bring a significant impact on everyday Indians, but the idea to protect domestic industries will boost local employment and innovation in the country. Whereas, consumers might face higher prices for imported goods, and there could be some sectors with a probability to be affected as well. Yet this futuristic approach appears to be a calculated risk: by shifting towards a more self-reliant model and broadening its trade partnerships, India is not just swiftly dealing with today’s tariffs but is preparing for a future where its supply chain is more diversified, and not solely reliant on the U.S.

India is expanding trade relations with Europe, ASEAN, and Gulf nations to reduce dependency on U.S. markets.

At the heart of these developments is the idea that trade frictions are not isolated incidents; they are part of a broader, ongoing transformation in global economic relations. The “tariff tug-of-war” between India and the U.S. is a microcosm of this transformation, which highlights how countries are reconsidering their economic strategies in a world where trade policies are being used as tools for geopolitical influence. India’s approach of cautious retaliation, strategic domestic investment, and proactive diversification provides a glimpse into how emerging economies can chart a course through turbulent international waters.

To conclude, U.S. trade frictions have pushed India to reconsider its overreliance on a single trade partner, forge new trade alliances with Europe, ASEAN, and the Gulf, and strengthen domestic industries through initiatives like Atmanirbhar Bharat. By doing so, India is positioning itself as a self-sufficient and globally integrated economy, securing its trade interests when relations with U.S. become uncertain to prepare for a future where geopolitical conflicts could heavily impact global trade dynamics.

The Author, Saif Ali is pursuing a Bachelor of Laws LL.B. at the University of Sindh Jamshoro. He has a profound interest in International Law and Policy and their impacts on regional dynamics and global security.