How India Can Deal With Trump And His Tariffs 'Creatively'

The return of Donald Trump to the White House has already sent ripples across the global economy. His aggressive stance on trade policies, particularly tariffs, is back in full force. One of the first casualties of this renewed hardline approach has been Colombian President Gustavo Petro, who attempted to challenge Trump on immigration and trade policies—only to capitulate in a matter of hours.

As the world watches Trump’s moves with a mix of trepidation and anticipation, India finds itself in a familiar position: balancing its strategic interests while fending off potential economic blows from a protectionist America.

A Trump Tariff Storm Approaching India?

It didn't take long for Trump 2.0 to label India as part of the “tremendous tariff-makers” club, lumping it alongside China and Brazil. His rhetoric, reminiscent of his first term, has already signaled that Washington’s economic dealings with New Delhi may not be as smooth as before. Gone are the days of the “Howdy, Modi” bonhomie; Trump now appears more focused on trade deficits than diplomatic pleasantries.

Historically, Trump has viewed India’s tariff structure with skepticism, often calling it the “tariff king.” His grievances include high import duties on:

• Agricultural goods – 70% tariff on apples, 17% on almonds
• Luxury goods – 150% tariff on imported alcoholic beverages
• Electronics – High duties on high-end products like iPhones and laptops
• Motorcycles – 100% tariff on luxury brands, including Harley-Davidson
• Medical devices – Price caps on imported stents and medical equipment

With a potential push for deeper market access, Trump may demand sweeping reductions in these tariffs or impose retaliatory measures on Indian exports, setting the stage for a challenging trade negotiation.

Trade Wars and Strategic Maneuvering

During Trump's first term, US-India trade relations experienced turbulence. The revocation of India’s Generalized System of Preferences (GSP) benefits in 2019 was a stark reminder of Trump’s willingness to weaponize trade policies. Now, with no re-election pressure, Trump’s second term could see an even more aggressive push for trade concessions.

India's current trade surplus with the US—approximately $45.7 billion—is another potential flashpoint. Given Trump's hardline stance on trade deficits, India may find itself at the receiving end of a targeted tariff hike.

Immigration: Another Flashpoint

Beyond trade, Trump's hardline immigration policies present another challenge for India. Reports suggest that India is preparing to take back around 20,000 undocumented immigrants from the US. However, with over 725,000 Indian illegal immigrants residing in America, the pressure from the Trump administration could escalate.

Trump’s policies might also impact H-1B visas, a crucial program for India’s IT sector. With Indians constituting over 70% of H-1B visa holders, any tightening of work visa policies, fee hikes, or extension restrictions could significantly affect Indian professionals and tech companies.

Additionally, with over 200,000 Indian students studying in the US, any restrictive post-study work policies could deter future enrollments, impacting both Indian students and American universities that rely on international tuition fees.

India’s Diplomatic Playbook

India has a few strategic options to counter Trump’s tariff threats and immigration policies while maintaining strong bilateral ties:

1. Leverage Indo-Pacific Strategy – As a key player in the region, India remains crucial for Washington’s counter-China policy. Highlighting this strategic importance could help temper Trump’s aggressive stance.

2. Backchannel Diplomacy – Engaging with pro-India lawmakers, influential Indian-origin officials in Washington, and corporate allies can help mitigate trade tensions.

3. Targeted Concessions – Opening up select sectors, such as defense, retail, and e-commerce, to US firms could serve as a bargaining chip to ease tariff pressures.

4. Strengthen Trade Alternatives – Diversifying trade partners and boosting economic self-reliance through initiatives like “Make in India” can help cushion the impact of potential US tariffs.

A Balancing Act for the Next Four Years

Trump’s second term presents India with a complex set of challenges. With the US being India’s largest export market, New Delhi will have to navigate the situation carefully, ensuring that economic interests are safeguarded without jeopardizing the broader US-India relationship.

The road ahead will require a mix of resilience, diplomacy, and strategic compromises. In the face of Trump's "America First" policy, India must adopt a “negotiation first” approach—leveraging its global standing while being prepared for tough trade-offs.

How India handles Trump’s tariffs will define the next phase of its economic and diplomatic trajectory on the world stage.