This article is authored by Adv. Anagha Mohan, an advocate practicing before the High Court of Kerala and currently pursuing her LL.M. in Commercial Law. Her areas of expertise include mergers and acquisitions, securities regulation, and international trade, with a strong academic and professional engagement in complex corporate transactions. She is joined by Co-author Adv. Devendhu A.P., a law graduate pursuing his LL.M. in Commercial Law with a focus on corporate, trade, and regulatory frameworks. Together, they bring a blend of practical legal experience and academic insight to analyze India’s response to the U.S. tariff shock.
ABSTRACT
The recent escalation of the U.S.-India tariff dispute, culminating in the United States imposing tariffs of up to 50% on a broad range of Indian exports, has presented a significant challenge to India’s trade and economic policies. The tariffs were largely motivated by the U.S. discontent with India continuing to choose Russia as a trading partner, though this being the stated reason,the U.S imposition of such levies seems more suggestive of having an alternative and rather more important underlying reason that is the strengthening of the BRICS alliance. An empowered BRICS bloc has the potential to challenge the hegemony of the dollar in international finance. In this article, we will examine all of India’s countermeasures towards the American tariff shock.
INTRODUCTION
U.S.-India tariff dispute underscores the challenges faced by emerging economies like India in navigating a global trading system still largely shaped by Westerneconomies’ interests. The United State’ decision to impose steep tariffs on Indian exports has been justified by Washington on grounds of alleged protectionism, trade imbalances, and regulatory hurdles. However, from the Indian standpoint, these accusations overlook the developmental imperatives that inform its trade policies, including the need to protect vulnerable agricultural sectors, ensure affordable access to medical equipment, and safeguard digital sovereignty in an era of increasing data colonialism. By targeting India with a unilateral tariff hike, the U.S not only undermines the principles of fair trade but also signals an attempt to pressure India into conforming to market liberalization that may not align with its domestic priorities. India, in turn, has responded with measured counter tariffs while simultaneously diversifying its trade relations, strengthening engagement with BRICS and the Global South, and reinforcing its long-standing policy of strategic autonomy. Far from being a mere trade skirmish, this dispute reflects a deeper contest between protectionist nationalism in the West and the right of emerging economies to pursue independent economic policies that balance growth with equity. In this light, India’s counter stance is not simply reactive but part of a broader geopolitical realignment that challenges the durability of the U.S. global dominance.
The Escalation Of Tariffs In 2025
Citing ‘national security’, the US levied tariffs on imports of steel and aluminium under section 232 of the Trade Expansion Act, especially under the Trump administration of 2019. India, was subjected to 10% export duties on aluminium and 25% levies on steel. India’s privilege under the Generalised System of Preferences was later revoked in 2019. India was forced to develop more comprehensive long-term strategies and short-term reactions. India put reciprocal duties on around 28 US goods, including politically sensitive exports from US states like California and Washington, such as apples, walnuts, and almonds, after first delaying retaliation to prevent escalation. India sought communication with the US through bilateral discussions and the India-US Trade Policy Forum. The goal was to negotiate sector-specific reliefs or, at the very least, secure a partial restoration of trade privileges. At the WTO, India contested US steel and aluminium tariffs in 2018, claiming that the national security rationale was a covert protective measure. In order to assert India’s rights under multilateral trade law, this was a planned, rule-based reaction. Beyond quick reprisal, India’s longer-term plan seeks to strengthen resilience and lessen vulnerability. India strengthened economic relations with the EU, ASEAN, Africa, and Latin America, speeding up attempts to lessen reliance on the US market. This approach is reflected in discussions with the UK and EU, as well as trade accords with the UAE and Australia.
While the US stuck to its national security posture, India’s case was still in the system. India decided to lift the 2019 retaliatory tariffs on several US farm products as part of an agreement with the US on June 22, 2023, to end six WTO disputes and proceed towards market access cooperation. On September 6, 2023, India formally abolished the extra duties, which were timed to coincide with the New Delhi G20. Litigation was transformed into concessions and trade-offs in the 2023 package. It de-escalated a conflict that had spread to other areas of the partnership and gave Indian buyers supply certainty again. With section 232 remaining in place and without achieving GSP restoration, India lost leverage. This implies that metals are still vulnerable and that any tightening in the future may happen again. After India removed counter duties, farm state pressure in the US decreased, reducing India’s domestic negotiating leverage. India flagged effects on 7.6 billion dollars in exports when it informed the WTO in May 2025 that it would re-impose counter duties in response to ongoing or extended US Section 232 restrictions. While negotiations are ongoing, US officials openly contend that India has no legal basis for reprisal. This suggests that despite the truce in 2023, there is still latent instability. By reminding Washington that the 2023 détente was conditional rather than a surrender, the notice restores negotiation leverage. It also aligns India with a broader group unhappy with the open-ended national security carve-out. The possible risk is that a re-escalation would split the larger India-US agenda, that is, Defence coproduction, supply chains, semiconductors, etc., because of the WTO’s statement and the US position on national security, unilateral retaliation runs the risk of being tit for tat without a clear legal exit.
The blanket 25% tariff imposed by President Trump on August 1, 2025, was framed as part of his broader protectionist push to defend American industries and reinforce his “Tariff King” image. Rooted in the logic of economic nationalism and a history of using tariffs as leverage, the move was not unique to India. Trump had earlier extended similar measures to China, the European Union, Canada, and such other nations, but India soon became a focal point. The U.S. cited India’s “Unfair trade barriers” and particularly its refusal to dismantle agricultural and dairy tariffs as justification. Matters intensified on August 6, 2025, when an additional 25% penalty tariff was announced, explicitly tied to India’s continued purchases of discounted Russian oil, despite U.S sanctions. By August 27, 2025, Indian exports to the U.S were facing a 50% tariff burden, hitting crucial sectors such as textiles, gems and jewelry, shrimp, furniture, and chemicals. While these measures were framed as protecting American producers, they stemmed equally from Washington’s strategic use of tariffs as a foreign policy tool, pressuring India on energy, agriculture, and global alignment. The European Union serves as a cautionary example during these geopolitical tensions by showing how, under pressure, it had agreed to a lopsided deal imposing a 15% tariff on its exports while committing to invest heavily in the U.S economy. Similarly, Asian nations like Vietnam and Indonesia have faced difficult compromises under U.S pressure.
Political and Economic Interface of the US and India
The new tariff policy strained the traditionally strong US-India strategic relationship. Politically, India considered this move to be against the spirit of the liberalized trade system. As a result of the Indo-Pacific strategy, India and the US were trying hard to deepen their connection and strengthen their defence and security systems. Likewise, their trade interests were also made balanced. In view of the domestic politics in India, the government framed strict retaliatory tariffs as a measure of sovereignty, as a signal that the nation is not open to face unfair trade treatment from any of the global powers. India also had to manage its domestic lobbies, such as fruit importers who rely on the much cheaper US produce, against the pressure from ordinary farmers who accepted the tariffs that made Indian produce more competitive and marketable. Due to India’s retaliatory tariffs, the US agricultural exports that were popular with urban middle-class and upper-class consumers, such as apples, walnuts, and almonds, have become more costly. As a result, many of the consumers started substituting products with home products, changing their consumption habits. In contrast, lower US demand for Indian exports resulted in increased steel and aluminium prices for Indian consumers in local markets, which had an indirect impact on packaging, automotive, or construction sectors.
Given their close political and strategic relations and mutual worry about China’s expanding geopolitical ambitions in both the Pacific and Indian seas, India must contend with the Trump administration’s new protectionism. Beginning in the early years of this century, the US government has prioritized developing a strategic partnership with India while respecting India’s autonomy over its own trade and investment policies and refraining from trying to sway India’s position on matters of international trade policy. India continued to gain preferential market access under the US GSP program and other ‘special and differential’ treatment granted to poor nations in bilateral commerce with the US. The Trump administration’s trade strategy has clearly deviated from this practical approach. In the WTO- centred global trading system, it places more emphasis on reciprocity in tariff agreements and less emphasis on India’s potential as a strategic partner and its ‘developing country status’. A lengthy bilateral trade battle has been set up by Trump’s use of tariffs as a negotiating tool in bilateral economic relations, and growing protectionist inclinations in India brought about by the Modi government’s ‘Make in India ’ policy. The two nations now have the difficult chore of advancing an agreement that balances Modi’s ‘Make In India’ policy emphasis and Trump’s ‘America First’ tariff deal, all the while monitoring their shared concern about China’s expanding geopolitical ambitions across both the Pacific and Indian oceans.
The goals of self-reliant India and Production-linked Incentive programs are to enhance high-value exports, develop domestic value chains, and lessen dependency on imports. India is prioritizing technology-intensive exports, pharmaceuticals, IT services, and renewable energy equipment instead of concentrating solely on commodities like steel and aluminium. These industries are less susceptible to tariffs based on commodity prices. India is still advocating for changes to the WTO dispute resolution process, highlighting how major economies’ unilateral tariffs violate international trade regulations. This places India in line with other developing nations dealing with comparable problems. Despite ongoing economic tensions, India and the US remained strategic partners in technology, defence, and security (Indo-Pacific policy, Quad). This illustrates India’s understanding that enduring geopolitical ties with the US are more important than transient trade disagreements. By investing in higher-grade steel, specialty alloys, and downstream sectors, India was able to diversify its export bases and grow its domestic steel and aluminium industries throughout the tariff shock.
CONCLUSION
The Indian economy will be greatly impacted by any change in US trade policies. The impact of bilateral tariff policy on the Indian economy was evaluated using a single-country economywide model, the results of which we reported in this note. The following policy conclusions were drawn.
First, India’s exports, GDP, employment, and household income are all negatively impacted when US tariffs on Indian imports are raised. India is comparatively exposed and much more vulnerable to trade policy shocks than the US because it is a net exporter to the US, and trade with the US makes up 11% of India’s total trade (for instance, trade with India accounts for only 2.5 percent of overall US trade).Second, the negative effects on the Indian economy will worsen if India decides to raise its own tariffs on US imports in retaliation. Increased import taxes will increase the cost of imports and devalue the Indian rupee even more. Domestic production costs will rise, which over time may hurt investments, reduce productive capacity, and impede the Indian economy’s ability to create jobs and raise its income. Despite being preliminary, these findings imply that India has no compelling economic justification for a trade battle with the US.Third, negative effects on the Indian economy may be completely averted if India gave tariff concessions to the US in advance to avoid higher US tariffs. Indeed, according to our estimate, tariff concessions will lead to a modest rise in GDP, employment, income, and exports. Indian tariffs do, of course, have the effect of protecting certain indigenous producers from outside rivals, and although trade liberalization benefits India overall, certain industries may suffer.
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