In an increasingly fractious world order, the United States has fired another salvo in its protectionist trade war, this time targeting India with a hefty 25% tariff on select exports, effective August 1. The intent is obvious — to coerce, to corner, and to compel India into making market concessions. But Washington is in for a rude shock. Bharat is not the soft state it once was under Congress regimes, where every foreign pressure resulted in a policy U-turn. Today’s India, under Prime Minister Narendra Modi, is made of sterner stuff — a nation with deep economic resilience, vast domestic absorption capacity, and a leadership that refuses to blink. Let’s not mince words — the tariff is punitive and discriminatory. India faces a higher tariff burden than its competitors: the EU (15%), UK (10%), Vietnam (20%), and Indonesia (19%). That’s a strategic hit. Labour-intensive sectors like textiles, gems and jewellery, electronics, and auto components—many of which rely heavily on US markets—will feel the squeeze. The gems and jewellery sector, for example, sends nearly 30% of its exports to the US. In textiles, 28% of shipments are US-bound. These are not insignificant numbers. But here’s what the Trump administration is underestimating: the Indian economy is no longer export-dependent in the way it was a decade ago. With a $3.9 trillion GDP, a consumption-driven growth model, and a government investing aggressively in infrastructure, digital transformation, and manufacturing self-reliance, India has the buffer to withstand these short-term trade shocks. Modi is not merely reacting — he’s already preparing. The government’s calibrated response, including tariff reviews on US goods and acceleration of export market diversification, is a clear signal that India won’t be pushed into a corner. Indeed, the Indian economy has the muscle to absorb the initial blow. Yes, some economists warn of a potential 20 basis point hit to FY26 GDP if the trade standoff drags on. But context matters: India grew at 7.4% in Q4 FY25, among the fastest rates globally. Even with marginal erosion, the trajectory remains robust. The fundamentals are intact. Inflation is under control, the rupee is relatively stable, and investor confidence is high, as seen in record FDI inflows.
More importantly, the trade shock may, paradoxically, trigger long-term benefits. First, the pharma sector—one of India’s top US-bound exports—is currently exempt from the 25% tariff, offering some immediate relief and an opportunity to deepen its global footprint. Second, this crisis could fast-track long-pending reforms: diversification of export markets, strengthening of domestic value chains, and promotion of high-value, IP-driven manufacturing. India cannot afford to compete with low-cost sweatshops like Bangladesh or Vietnam forever. This is the push to move up the ladder — towards brand India, not just “Made in India.” The Modi government understands this better than most. Policies like the Production-Linked Incentive (PLI) scheme, the push for semiconductor fabs, and the Make in India 2.0 are not reactionary measures. They are part of a decade-long strategy to insulate the Indian economy from external shocks, be they tariff wars, oil price volatility, or supply chain disruptions. What we are seeing now is the real-time stress test of those policies — and so far, India is holding steady. Also worth noting: some seasoned analysts believe this US tariff is not cast in stone but a tough negotiating tactic. Washington may be playing hardball, but so is Modi. He’s a hard nut to crack — and the Americans know it. The same Trump administration that now imposes tariffs will soon realise it cannot afford to alienate a democratic counterweight to China and a critical strategic partner in the Indo-Pacific. In the end, this tariff war may just be another blip in India’s rise — a temporary turbulence on a flight destined to cruise at higher altitudes. Bharat has been through worse — currency crises, sanctions, even nuclear isolation. Each time, it emerged stronger. This time will be no different. So let the pessimists grumble and the doomsayers warn. The Indian economy is not derailing — it is recalibrating. Modi isn’t rattled — he’s recalculating. And as history has shown repeatedly, when the dust settles, India — patient, pragmatic, and persistent — usually has the last laugh.
