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The US is India's largest export destination, with bilateral trade totaling about $190 billion in 2024. Indian exports to the US include pharmaceuticals, information technology services, textiles, and machinery. The new tariffs threaten to disrupt these sectors and may lead to retaliatory measures from India.

The Trump administration has maintained that the 25% tariff will serve as leverage to push for a more equitable trade agreement. Despite five rounds of negotiations, major sticking points remain, particularly over India's resistance to allowing genetically modified crops and expanded dairy market access.

India's trade policy evolution

India’s trade policies have gone through notable transformation over the past several decades. Post-independence, India adopted a protectionist strategy centered around import substitution and state-led industrialization. The era of the "License Raj" saw some of the highest global tariffs, extensive import licensing, and significant restrictions on foreign investment.

The 1991 economic crisis marked a turning point, prompting India to liberalize its economy. The reforms included slashing tariffs, dismantling import licensing, and encouraging foreign investment. As a result, India's average tariffs dropped from 80% in the early 1990s to approximately 10% by 2008, and its trade-to-GDP ratio increased substantially.

More recently, however, India has shown signs of returning to strategic protectionism. Through initiatives like "Made in India" and "Atmanirbhar Bharat" (Self-Reliant India), the government has promoted domestic manufacturing while introducing quality control measures and non-tariff barriers for numerous imported goods. These policies have drawn criticism from several trade partners, including the United States.

Although Indian officials have not issued a formal response to the new tariffs, sources suggest that the government is preparing contingency plans, including exploring new export markets and trade partnerships. Despite recent pressures, India's broader trade strategy remains focused on balancing domestic industrial development with international engagement. The latest US tariffs are expected to test the resilience of this approach as India seeks to maintain its global economic standing while addressing the needs of its local industries.

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