As Trump’s trade war escalates, New Delhi scrambles to safeguard its economy while keeping its options open.
April 2 looms, bringing with it U.S. President Donald Trump’s tariffs that are anxiously anticipated by traders and economists alike. Like many of America’s trade partners, India finds itself on edge. The pressing question is will these tariffs push New Delhi closer to Beijing?
The potential implications of Trump’s tariffs are not lost on Prime Minister Narendra Modi’s government. India, after all, exported $74 billion worth of goods to the U.S. last year, making Washington one of its most crucial economic partners. A sudden hike in tariffs could send shockwaves through India’s manufacturing and services sectors, disrupt employment and imperil Modi’s ambitions of making India the world’s third-largest economy.
Among Trump’s recurring grievances is India’s reluctance to grant market access to American motorcycle manufacturers like Harley-Davidson - a point he has raised with the insistence of a salesman denied entry to his best prospect’s office. Unlike other nations that have used protectionist measures to shield domestic industries, India has refrained from outright nationalism in trade policy, instead attempting to balance economic openness with strategic caution.
New Delhi, in a bid to mollify Washington, has been expanding its energy imports and deepening its engagement in defense procurement. Yet, the fundamental arithmetic remains unchanged: increased imports and stagnating exports leave India saddled with a widening trade deficit. The Modi government, cognizant of this, is working feverishly to strike a deal that minimizes economic damage while keeping diplomatic relations intact.
Indian diplomacy is hedging its bets, fast-tracking trade talks with the EU while deepening ties in South Asia and Africa. Meanwhile, China’s once-dominant economy is faltering, even as its defense spending yields cutting-edge fighter jets. The U.S., wary of Beijing’s ambitions, has responded with the accelerated development of the F-47 and a surge in Boeing’s jet engine orders.
China’s territorial ambitions have only exacerbated its predicament. Its expansionist maneuvers, whether in Taiwan, the South China Sea or even as far as New Zealand, have unsettled policymakers in Washington and Brussels alike. Western manufacturers, wary of Beijing’s increasingly aggressive posture, are seeking alternatives in Vietnam, Indonesia and, notably, India in a trend that underscores China’s growing vulnerability.
For all of Trump’s tariff threats, history suggests that his administration may ultimately show leniency toward traditional allies - Europe, the United Kingdom, even India. But China, the perennial rival, is unlikely to be afforded such considerations.
New Delhi has been preparing for the worst. Modi recently convened a high-level meeting with External Affairs Minister S. Jaishankar and Commerce Minister Piyush Goyal. It is believed that one of the more radical proposals on the table is a shift in India’s trade posture towards China.
Hawks within Modi’s inner circle argue that any softening toward Beijing would amount to rewarding aggression. With Trump’s trade war threatening to upend Indo-U.S. economic ties, some in New Delhi are wondering whether it’s time to rethink this approach. China, the world’s second-largest economy, presents a pragmatic, if politically uncomfortable, option.
Could India, in a bid to hedge against American volatility, ease its restrictions on Chinese imports and investments? Could it roll back visa curbs or even restore the operations of some banned Chinese tech firms? If India signals openness to Chinese investments, Beijing will be quick to seize the opportunity. The two Asian giants, long seen as natural adversaries, could find themselves forging an uneasy trade détente.
In Washington, the mood remains characteristically volatile. Piyush Goyal has been shuttling between New Delhi and Washington, trying to hammer out a last-minute deal. Meanwhile, senior Trump officials including Christie Cangalo and Tulsi Gabbard have visited India in recent weeks, suggesting that backchannel talks are underway. Reports suggest that Trump’s team is considering a more targeted approach to India rather than a blanket tariff hike.
So what will happen on April 2? Will India face the full brunt of Trump’s tariffs, or will New Delhi manage to extract a last-minute exemption? More crucially, will the specter of a trade war push India closer to China?
For now, Modi’s government is balancing diplomatic engagement with economic contingency plans. But in a world increasingly defined by Trump’s unpredictability, no amount of preparation may be enough.
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