Tariffs and Turning Tides

Many American analysts opine that the Trump tariffs will hurt the US. In his piece Trump’s Tariff Tantrums Are Hobbling the U.S Economy, Jeffrey A. Sonnenfeld, Professor at Yale University, has stated that tariffs have fundamentally disrupted markets, leaving businesses vulnerable to the double threat of uncertainty and cost inflation. John Mearsheimer, a leading American international relations expert and Professor at the University of Chicago, has said that the Trump administration’s India policy is a “colossal blunder” and asserted that secondary tariffs on India for buying Russian oil “won’t work.” Trump’s former National Security Adviser John Bolton has said that he “has shredded decades of efforts” made by the West to strengthen diplomatic and strategic ties with India with his “disastrous” tariffs. The Washington Post summed up the position in its September 1 editorial: Trump’s white-knuckling with India could backfire.

A majority of Americans are concerned about tariffs, fearing they will raise consumer prices and hurt the economy. Polls show disapproval, with many believing tariffs will cause inflation, damage businesses, and affect sectors like agriculture. While some view tariffs as boosting domestic manufacturing, these hopes are outweighed by concerns about rising costs. Even among Republicans, worries about inflation are high, though disapproval is stronger among Democrats and independents. Concerns are also mounting because Trump has promised to impose hefty import taxes on pharmaceuticals, a category largely spared in his trade war. Diederik Stadig, a healthcare economist with ING, wrote that lower-income households and the elderly would feel the greatest impact. “A tariff would hurt consumers most of all,” he noted, with both direct costs at pharmacies and indirect costs through higher insurance premiums.

Multiple court challenges to tariffs imposed under the International Emergency Economic Powers Act (IEEPA) have succeeded in lower courts. On August 29, 2025, the U.S. Court of Appeals for the Federal Circuit ruled 7-4 that most of these tariffs are illegal and that the President lacks authority under IEEPA to impose sweeping tariffs of unlimited duration. The court delayed enforcement until October 14, 2025, to allow an appeal to the Supreme Court. Trump has signalled his intent to take the case higher. Until it is resolved, global trade will remain destabilised. According to UNCTAD, the rules-based system has been weakened, with countries increasingly resorting to tariffs to pursue domestic goals. India is actively expanding its bilateral trade network as a hedge, seeking greater negotiating leverage amid uncertainty with the US.

The Trump administration has underestimated India’s sensitivities and miscalculated that New Delhi would bow to pressure as Japan and the EU did. Instead, India has taken a firm stance, prioritising its economic interests. The latest tariffs—cumulative 50% in August 2025—have prompted India to recalibrate its foreign policy, strengthening ties with Russia and China while diversifying economic relationships. India has rejected U.S. demands to stop buying discounted Russian oil, insisting on energy security. New Delhi argues it is inconsistent to punish India while others still buy Russian energy. India has affirmed its “special relationship” with Moscow, a longtime defence partner. Thus, U.S. tariffs have inadvertently reinforced the India-Russia partnership. The tariffs have also accelerated rapprochement between India and China, which has been strained since the 2020 border clash. Modi met Xi Jinping on August 31, signalling “pragmatic rapprochement” to secure economic stability. They agreed to resume trade ties and address the border dispute. India seeks Chinese investment to create jobs, while Beijing values India as a vital market amid U.S. protectionism.

India has simultaneously deepened ties with other blocs. The UK signed a landmark Comprehensive Economic and Trade Agreement (CETA) on July 24, 2025, eliminating tariffs on 99% of Indian exports and reducing tariffs on 90% of UK goods. It is the most significant trade deal India has signed outside Asia and the UK’s largest since Brexit. FTA negotiations with the European Union are also at an advanced stage, expected to conclude by year-end. The EU was India’s largest trading partner in goods at USD 137.41 billion in 2023-24, with services trade estimated at USD 51.45 billion.

Japan has emerged as another focus. PM Modi’s visit to a Japanese chip factory underscored efforts to strengthen semiconductor supply chains. Both nations agreed to boost Japanese investment in India to $6.8 billion annually and expand worker and student exchanges. India-Australia ties, elevated to a Comprehensive Strategic Partnership in 2020, have grown rapidly. The Economic Cooperation and Trade Agreement (ECTA), in force since 2022, has slashed tariffs, saving hundreds of millions. By 2026, 90% of Australian exports to India will be tariff-free. U.S. tariffs reinforced Australia’s push to diversify toward India, strengthening bilateral cooperation. Trump’s tariffs have also pushed India and South Korea to consider stronger ties, despite differing responses. South Korea secured lower U.S. tariffs, while India was hit with higher duties. Both aim to expand trade to $50 billion by 2030, focusing on technology, defense, and Indo-Pacific strategy. Brazil, heavily impacted by U.S. sanctions, is also intensifying relations with India. Bilateral trade was $12 billion in 2024, with goals to surpass $20 billion by 2030, covering agriculture, energy, and pharmaceuticals. Argentina, too, is strengthening ties. Bilateral trade reached $5.2 billion in 2024, with strong growth in 2025 following PM Modi’s July visit.

India has deepened ties with the Gulf and Africa. With UAE, it has signed a Comprehensive Economic Partnership Agreement, while strengthening defence cooperation with Saudi Arabia. In Africa, India is relocating some production to avoid U.S. tariffs, notably in apparel and textiles. Garment makers like Gokaldas Exports are expanding factories in Kenya and Ethiopia, while diamond merchants explore Botswana. Africa’s diversification needs align with India’s investment approach. Canada, after political tensions in 2023, is now resetting ties with India. Trade grew 3.2% in 2025 to $8.6 billion. High-level meetings at the G7 Summit have helped restore relations, with steps to revive trade talks and enhance partnerships.

In short, India has asserted strategic autonomy by refusing to be pressured into a U.S. trade deal, continuing Russian oil purchases, and pursuing “multi-alignment.” By diversifying partnerships across Europe, Asia, Latin America, Africa, and the Gulf, India is positioning itself as a central player in a multipolar world.

Views expressed are personal