India seeks a way out amid US tariff pressure

Photo caption — President Trump's decision to impose record high tariffs on Indian goods has caused market turmoil, exports to plummet, and hundreds of thousands of jobs to be lost (in photo: US President Donald Trump, right, and Indian Prime Minister Narendra Modi at a meeting on February 13, 2025). Photo: ANI/TTXVN

Commenting on the East Asia Forum website (eastasiaforum.org) recently, Ankur Singh, an analyst at the Center for New Economic Studies at OP Jindal Global University, said that trade protectionism has moved from words to economic action for India.

In early August 2025, US President Donald Trump imposed steep tariffs of more than 50% on imports from India, citing New Delhi’s continued purchases of Russian oil. The move was not just a routine trade adjustment but a tool of political coercion, posing a profound strategic challenge to India’s manufacturing ambitions and economic growth.

The high tariffs, far exceeding those applied to other Asia-Pacific countries, immediately created significant shockwaves. In the first week of August alone, foreign investors dumped $900 million of Indian stocks, following a net outflow of $2 billion in July.

Moody's Ratings has warned that India's real GDP growth could slow by about 0.3 percentage points this financial year.

Although bilateral goods trade with the US accounts for only about 2.5% of India's GDP, this apparent stability masks synergistic losses:

Exports affected: Conservative estimates suggest that around US$30–35 billion worth of exports are directly affected, which could rise to US$64 billion if indirect impacts are included.

Hard-hit sectors: Electronics exports ($14.4 billion), pharmaceuticals ($10.9 billion) and cut and polished diamonds ($4.8 billion) to the US were the hardest-hit segments.

Jobs at risk: Industry associations warn that 200,000–300,000 jobs would be vulnerable, especially for small manufacturers dependent on a single order book.

Shock absorbing pads are important

However, the Indian economy had two important buffers that helped cushion the initial shock:

Reserve Bank of India (RBI) monetary policy: The RBI supported the currency market by allowing a controlled depreciation of the rupee, from 85.64 rupees to 87.89 rupees per dollar in early August, before stabilizing at around 87.02 rupees. This reduced export prices without triggering uncontrolled capital outflows.

Resilience of the services sector: India’s services sector remains largely protected. With exports reaching $32.1 billion by June 2025 and software services reaching $205.2 billion by FY2024, the sector continues to provide India with valuable policy space.

While economic buffers may be able to absorb the immediate shock, Washington’s actions have been strategically clear: trade has become the primary tool of political coercion. This reality, Singh argues, requires New Delhi to build an economic strategy based on purposeful pillars of resilience, treating internal reform as a matter of national security, specifically:

First, deepening Asian economic integration: With total merchandise exports to the US reaching nearly $79.4 billion by 2024, over-reliance on Western markets has become a clear weakness. India needs to step up economic diplomacy, such as: Accelerating the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with the Gulf Cooperation Council (GCC). Strengthening supply chain integration with ASEAN partners such as Vietnam and Indonesia.

By becoming an integral link in the Asian network, India can diversify both opportunities and risks.

Second, expand de-dollarization trade arrangements: Washington’s ability to inflict economic harm is amplified by the global dominance of the US dollar. Reducing dependence on the US dollar must be seen as a strategic imperative. New Delhi should expand successful pilots, such as the India-UAE agreement on direct trading in rupees and dirhams. Each such agreement creates a small but important building block in an alternative financial architecture, mitigating settlement risks and political shocks.

Third, accelerate domestic competitiveness reforms: The most sustainable barrier against external pressures is strong domestic competitiveness. Internal reforms must be accelerated through: Fully implementing the National Logistics Policy to cut high logistics costs, which are eroding export margins. Accelerating the digitalization of small businesses through platforms such as the Open Network for Digital Commerce (ONDC), which directly boosts the global viability of manufacturers.

The US tariffs are essentially a structural test of India’s resilience, Singh concludes. The immediate choice for New Delhi is clear: align its economic strategy with a more demanding global order or risk being caught off guard as US politics turns protectionist.

Source: https://baotintuc.vn/phan-tichnhan-dinh/an-do-tim-loi-thoat-giua-ap-luc-thue-quan-my-20250929205730772.htm