(The views expressed in this article are solely those of the author and do not reflect the views of Vikatan. This article was written by C.P.M. R. Sindhan.)
"Being America's enemy may be dangerous, but being its friend can be fatal," said American diplomat Henry Kissinger. This quote is now being echoed by the USA’s allied powers from multiple corners of the world. Now, it has begun to resonate in India as well.
The actions of US President Donald Trump are the reason for this. President Trump has announced blanket tariff impositions not only on his enemies but also on long-time friends. Even though he may not implement these announcements immediately, he uses these threats to position himself strongly at the negotiation table.
Trump’s new tariffs have now directly targeted India. From August 7, a 25% import tariff has been imposed on Indian goods exported to the USA. From now on, our exports will have to pay a 33.26% tax. Trump has also announced that, from August 27, an additional 25% penalty tariff will be imposed on countries that purchase Russian oil — and that there will be no more negotiations with India on this matter.
Only crude oil, refined fuels, iPhones and other smartphones, and certain electronic goods are exempt from this tariff. Exports of textiles, garments, jewellery, gems, pharmaceuticals, seafood, machinery parts, and some electronic equipment will be affected. The USA accounts for 18% of India’s exports. Some estimates suggest that these new tariffs could affect about half of these exports. However, according to PHDCCI, less than 2% of the country’s total exports will be impacted, and the effect on our GDP will not even be 0.19%.
Yet, when viewed sector-wise, these blanket tariffs could severely affect export-oriented MSMEs, as we are not prepared for such harsh conditions. American retail giants like Walmart, Amazon, Target, and Gap have announced that they will stop buying textile products from Indian companies, pressuring them to further reduce production costs — in some cases to the same level as manufacturing in Bangladesh. The purpose of this pressure is to offset the impact of US tariffs. If this happens, workers’ wages will drop and workloads will increase.
Import tariffs are indeed a double-edged sword. While they may initially hurt our production, in the long term they will cause inflation in the USA, adding as much as $2,500 annually to the expenses of American families. The lesson from history is that India should respond decisively and directly, without panicking.
In the 1950s, the USA tried to align India as part of its strategy against Soviet Russia. But India pursued a non-alignment policy. In response, US Secretary of State John Foster Dulles threatened that “those who do not stand with us are our enemies.” Nevertheless, India stood firm and used Soviet assistance to strengthen its self-reliance.
When India intervened to help create an independent Bangladesh, the USA attempted to interfere. India did not allow a US warship heading toward its border to proceed. This firm stance remains a historical example. However, after the collapse of the Soviet Union, India embraced globalization policies, and its non-alignment policy underwent various changes. It is in this altered context that we now face Trump’s threats.
Past threats and pressures were often presented as “protecting India’s interests.” But Trump is imposing his demands based solely on “American interests.” All the ideals of “free trade” and “free markets” touted during the globalization era seem to have been forgotten. This makes the current approach far more blatant.
Trump’s approach is that excessive tax increases will force beneficial agreements for the USA. In February last year, Prime Minister Modi visited the USA and was among the few world leaders to meet Trump in person after he assumed office as the 47th President. Those talks resulted in military and energy agreements, and a decision to negotiate a free trade agreement to double bilateral trade. Critics say the military deal saddled us with more expensive equipment and the energy agreement forced us to buy crude oil and nuclear reactors at higher costs.
Still, Trump was not satisfied. He began threatening additional tariffs, especially after noting the growing strength of the BRICS alliance and its discussions on alternatives to the US dollar. He warned that India’s participation in BRICS would invite extra taxation. India did not withdraw from BRICS, which has since expanded to include new members and partner nations.
During this time, Trump also claimed repeatedly that he intervened to prevent an India–Pakistan conflict, suggesting India had abandoned its stance against third-party mediation in bilateral disputes. Even while calling Modi his friend, Trump sought to undermine his image domestically. Modi, for his part, did not directly refute these remarks. The reality is that India — once a leader of the non-aligned movement — is no longer leading any bloc.
Following Trump’s threats, India’s representatives held five rounds of negotiations with the USA. Details have not been fully disclosed, but it is known that the US side is pressuring India to allow dairy products from large American corporate farms, as well as genetically modified seeds, into the Indian market without restrictions.
They are also demanding that India stop importing cheap Russian crude oil, claiming such purchases finance the war in Ukraine — even though the US continues trade with the EU, which also maintains relations with Russia.
Opening Indian markets to US corporate agricultural products would directly threaten our food security. China, for example, suffered greatly after opening its soybean market to the US, losing self-sufficiency and struggling to recover. India could face similar consequences. Likewise, if dairy import tariffs are removed, our self-reliance in milk production would collapse — a risk the Indian government appears determined to resist.
However, changes in oil imports from Russia may be considered. We currently refine this cheaper crude and export it, rather than passing on the benefit to domestic consumers. Oil companies gain through ethanol blending and reduced import costs. Buying Russian oil also helps maintain our foreign exchange reserves and keeps global prices stable. If our stance changes, we will lose these advantages. India argues that it is complying with G7 regulations and should not be penalized.
Although Trump has threatened many nations, only the EU, Vietnam, and Indonesia have concluded trade deals with the US. The EU agreed to further open its markets, invest $600 billion in America, and buy $750 billion worth of US energy. Indonesia and Vietnam also accepted additional tariffs.
China, meanwhile, negotiates while retaliating — reducing US soybean imports by shifting to Brazil, and leveraging its dominance in rare earth minerals (which make up about 70% of global production). Brazil’s President Lula da Silva has openly opposed politicized trade, threatening a 50% tariff on US imports.
India’s flexible approach has not enhanced its respect globally. The 2018 example of US sanctions on Iran is telling: India initially resisted but eventually stopped buying Iranian oil, harming both bilateral relations and our energy security.
India must urgently find alternative export markets. Until then, the government should help exporters absorb losses. Our vast domestic market is also a huge untapped resource — but expanding it requires significant public investment. Whether Modi will move in that direction remains uncertain.
The “Made in India” slogan, which encouraged domestic production, has been replaced by “Make in India,” with the expectation that global manufacturers would set up production in India for export. This has not materialized, and over-reliance on foreign investment has weakened our path to self-reliance, making us more vulnerable internationally.
The new US tariffs will further devalue the already weak Indian rupee. If BRICS’ de-dollarization efforts gain momentum, a long-term solution to the foreign exchange issue may emerge — but that is unlikely in the immediate future. For now, our only real leverage is the ability to buy oil from Russia and Iran in domestic currency, but this requires political will.
India must stand firm against US pressure and reclaim its position as a leader among non-aligned nations. Only with strong domestic markets, trade policies rooted in self-reliance, and active support for a multipolar world can we maintain political independence.
Henry Kissinger also said that America has neither permanent friends nor permanent enemies — only permanent interests. Likewise, India’s permanent goal must be the interests of its working people.