The resurgence of US President Donald Trump and his aggressive tariff policy places India in a uniquely precarious yet opportune position. As the world’s fifth-largest economy, India faces a fundamental choice: double down on protectionism or seize this disruptive moment to push bold, market-opening reforms. The stakes are high. Mr Trump’s trade war rhetoric and punitive tariffs on trading partners offer India a second chance to integrate more deeply with global markets ~ provided it acts decisively. Historically, India has reformed when crisis forced its hand. In 1991, a balance of payments crisis sparked sweeping liberalisation.
Today, the global trade environment, battered by tit-for-tat tariffs and protectionist sentiment, presents a less obvious but equally pressing challenge. India’s high average tariffs ~ around 12 per cent compared to China’s 3 per cent and the US’s 2.2 per cent ~ make it an outlier among major economies. While these duties have shielded domestic industries, they have also stifled competition, fostered inefficiencies, and left India with only a 1.5 per cent share of global exports. Prime Minister Narendra Modi’s government has flirted with liberalisation, cutting tariffs on select US goods ahead of high-level meetings with Mr Trump. But these are piecemeal gestures rather than a comprehensive reform strategy.
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India’s current approach, oscillating between protectionism and reluctant concessions, risks undermining its credibility as a serious trade partner. If India is seen as pliable, making unilateral concessions to avoid retaliation, it may sacrifice longterm bargaining power. Yet, there is a clear strategic opening. As global supply chains shift ~ driven by geopolitical tensions, tariffs, and the search for alternatives to China ~ India could position itself as a manufacturing hub. It missed the earlier wave of low-end factory jobs that powered East Asia’s rise, but opportunities remain in mid-level manufacturing, pharmaceuticals, electronics, and renewable technologies. Realising this potential requires not just tariff cuts but deeper structural reforms: improved logistics, streamlined regulation, stronger contract enforcement, and a predictable policy environment. There is also the pressing domestic need. India’s services sector, while thriving, cannot absorb the millions of low skilled workers entering the job market each year. Manufacturing exports, if scaled up, offer the most realistic path to job creation. But entrenched protectionism has protected inefficient firms rather than spurring them to compete globally. Breaking this cycle demands courage and clarity of vision. India should adopt a phased, universal reduction in tariffs, accompanied by safeguards against dumping where necessary.
Selective protectionism aimed at China may be warranted, but a blanket inward turn would be self-defeating. Moreover, India’s trade strategy should be driven by economic logic, not the desire to placate any single partner, however powerful. Mr Trump’s tariffs may be disruptive, but they offer India a rare moment of leverage. By boldly opening its economy, India can attract investment, create jobs, and reclaim its place in global trade. If it hesitates, it risks being left behind ~ again
