“India’s Global Moment: Rising Amid Tariffs and Trade Tensions”

Introduction

The global economy is undergoing a significant shift, with protectionism re-emerging as a dominant force. Led by the United States, a fresh wave of tariffs is disrupting global trade. U.S. President Donald Trump’s recent move to raise tariffs on imports from 57 countries signifies a pivotal turn in this evolving narrative. While many nations are bracing for impact, India finds itself uniquely positioned to turn this disruption into a strategic advantage.

Backed by the Aatmanirbhar Bharat vision, a skilled workforce, infrastructure development, and growing trade networks, India could emerge as a key beneficiary in the global reordering of supply chains.

Historical Context: Lessons from Tariff Conflicts

Tariff wars have long impacted global economic relations:

• Corn Laws (UK, 1815–1846): Raised food prices, harming industrial workers; repeal spurred industrial growth.
• Opium Wars (China–UK): Coerced trade led to long-term economic and political imbalance.
• McKinley Tariff (USA, 1890): Raised costs and provoked retaliation, showing the dangers of excessive protectionism.
• Smoot-Hawley Tariff (USA, 1930): Deepened the Great Depression as global trade shrank by 65%.
• Pasta War (1985) & Banana War (1993–2012): Highlighted how even narrow disputes can escalate trade tensions.
• Bush’s Steel Tariffs (2002): WTO pushback and domestic repercussions forced a policy reversal.

 

Key Insight: Tariff wars tend to harm global growth and cooperation, often leading to unintended consequences for all parties involved.

U.S. Tariff Strategy and Global Ripple Effects

To address its chronic trade deficit (peaking at USD 1.1 trillion in 2023), the U.S. imposed new tariffs on imports from 57 countries. On April 2, 2025, rates ranging from 11% to 50% were applied to key sectors.

Country	Tariff (%)	Key Exports Affected	Likely Impact
China	34–50	Electronics, steel	Retaliation, supply chain shifts
Vietnam	46	Textiles, electronics	Export decline, India gains
Cambodia	49	Apparel, footwear	Loss of U.S. market share
Indonesia	32	Palm oil, minerals	Competitiveness decline
Taiwan	32	Semiconductors	Disruptions, geopolitical friction
India	26	Chemicals, EMS, iron	Relative advantage
EU (avg)	20	Machinery, vehicles	Inflationary pressure, FTA talks
UK	10	Pharma, autos	Revival of trade dialogue

China’s strong countermeasures, including an 84% duty on U.S. goods, signal growing tensions. However, this global reshuffling opens new pathways for India.

India’s Emerging Trade Advantage

India’s trade with the U.S. in 2025 reached $90 billion in goods and $385 billion in services, led by IT and pharmaceuticals—sectors largely untouched by the new tariffs. This stability, combined with competitive positioning, enables India to capture new market share in sectors such as:

1. Textiles and Apparel

As global competitors like Vietnam and China face stiff U.S. tariffs, India’s textile sector stands to benefit. With established production centers like Tiruppur and Surat, India can expand rapidly.

 Strategic Actions:

• Enhance logistics and production capacity.
• Promote eco-friendly, certified products.
• Add value through design and innovation.

 2. Electronics Manufacturing Services (EMS)

India’s EMS industry, supported by Production-Linked Incentive (PLI) schemes, is gaining global traction. Tariffs on Chinese and Vietnamese electronics (40%+) give India a comparative advantage.

 Focus Areas:

• Localize supply chains and components.
• Boost R&D and design capabilities.
• Train the workforce for high-end manufacturing.

3. Chemicals, Iron, and Steel

India is gaining market share in specialty chemicals due to China’s regulatory constraints. Similarly, Indian steel producers are now more attractive to global buyers.

 Priorities:

• Scale production with environmental compliance.
• Promote Indian certifications.
• Improve port and logistics connectivity.

Trade Diplomacy and FTA Strategy

India’s approach to Free Trade Agreements (FTAs) has evolved. With 13 FTAs and 6 Preferential Trade Agreements already in force, India is now in discussions with over 50 nations.

 The UK Reconnects

The UK, after withdrawing from FTA talks in 2024, re-engaged in 2025. Rising post-Brexit vulnerabilities and China concerns have pushed the UK back to the negotiation table.

Implication: India is now viewed as a pragmatic and strategic trade partner.

 Expanding in the Global South

India is quietly building ties beyond the West with regions such as:

• West Asia: UAE, Saudi Arabia
• Africa: Kenya, Egypt, South Africa
• Southeast Asia: Indonesia, Philippines
• Latin America: Brazil, Mexico, Chile

 Advantage: India’s democratic model, transparent trade practices, and competitive pricing make it an ideal partner for long-term economic cooperation.

India’s Demographic and Economic Strengths

Youth as an Economic Driver

India’s workforce will continue to grow until 2057, while China and Western economies face demographic decline. This young population underpins both supply (labour) and demand (consumption).

 Benefits:

• Competitive labour costs.
• Expanding middle class and domestic market.

 Fiscal Stability vs. U.S. Debt Concerns

India’s fiscal prudence contrasts sharply with the U.S., where federal debt ballooned to $36.2 trillion by 2024. With $7.6 trillion maturing soon, the U.S. faces refinancing pressures.

India, meanwhile, emphasizes capital expenditure over subsidies, prioritizing long-term growth.

Aatmanirbhar Bharat and Infrastructure Push

The Aatmanirbhar Bharat initiative, launched in 2020, promotes self-reliance in sectors like defence, electronics, and clean energy.

Pillars of the Initiative:

• Investment in highways, ports, and logistics.
• PLI schemes to drive domestic manufacturing.
• Digital infrastructure (UPI, Aadhaar, ONDC) for scalable growth.

 Impact: These measures have triggered a multiplier effect on jobs, exports, and investment, making India more resilient to external shocks.

Conclusion: India’s Time on the Global Stage

Amid global trade tensions and shifting alliances, India is poised to become a global economic leader. Tariff differentials, demographic dividends, strategic reforms, and strong trade diplomacy are converging to offer India a unique growth trajectory.

If India continues along this path—prioritizing infrastructure, education, governance reforms, and global cooperation—it could anchor the next phase of global economic leadership.

In a world facing fragmentation and fiscal stress, India’s combination of youth, pragmatism, and macroeconomic stability offers a compelling vision for inclusive and sustained growth.

Authored By:

Brijesh Kumar Shukla
Chief Manager 
Union Learning Academy, Hyderabad