Testing Times For Indian Economy As Trump Terms The Country As ‘Tariff King’

For the last two months, the US has been creating problems for most of the countries as Donald Trump, the newly-anointed US President, has declared a global trade war, with an aim to reduce his nation’s debt pile of $36.22 trillion

The democratic world is witnessing a disturbing trend that is gaining traction. Increasingly, politicians are trumpeting themselves as ‘kings’ immediately after winning polls. Such ‘democratic kings’ impose personal agenda on people in the name of public good, do as per their whims and fancies and implement whatever they feel right. They give a damn to the aspirations of the people who have voted for them. The result! People have no option except living in torture chambers till the tenures of such ‘kings’ end. Of course, such regimes don't last a single term. But the damage is already done. Further, such countries and provinces not only lose precious time, but also need to foot the bill for repairing damages. That's a sad reality indeed.

The United States is the world's sole superpower now whether one agrees or not. Barring a few, all other countries knock at its doors if they encounter problems locally or globally.

But for the past two months, the US has been creating problems for most countries as Donald Trump, the newly-anointed President, has declared a global trade war, with an aim to reduce his nation’s debt pile of $36.22 trillion. It is not that the US has not created problems for other countries in the past. But such activity was confined to one or two countries and it was aimed at furthering its geopolitical interests. This time, the entire world is at the mercy of Trump’s tariff tantrums day in and day out.

Soon after taking reins as its 47th President, Trump imposed reciprocal import tariffs on products from Canada, Mexico and China in the first week of February. When Canada and Mexico retaliated with their tariffs on US goods, the Trump administration deferred its tariffs on these two countries before imposing them a month later.

In the meantime, the US also imposed tariffs on steel and aluminium imports. China, the biggest trading partner of the US, announced retaliatory tariffs as well.

Owing to the escalation in trade wars and frequent flip-flops by the US government, stock market wealth worth trillions of dollars is going into thin air globally. The world economy as well as markets will remain in turmoil if these tariff tantrums from the US continue for long.

But where does India stand in these chaotic times? Trump has on umpteen occasions described Prime Minister Narendra Modi as his friend. Especially after taking charge for the second time.

In the same vein, termed India as a tariff king! In his address to the Joint Session of Congress last week, Trump announced reciprocal tariffs on India and other countries effective from April 2. The US President particularly referred to high import tariffs in India on automobile products.

It may be recalled that even in his first term in office, Trump found fault with the high import duties in India on US-made Harley Davidson motorcycles. Perhaps, he had this in mind when he referred to high tariffs on automobile imports into India in his recent address to Congress. But India has already reduced import duties on high-end motorcycles considerably. Some of these cuts came in the recent Union Budget.

It is to be seen how these reductions will impact the tariff dynamics between the two countries. But many Indian automakers and automotive component makers export their products to the US. If the US imposes higher tariffs on these products, Indian companies will obviously be at the receiving end.

However, the automobile sector is not the only one which will be impacted. India’s pharmaceuticals, gems and jewellery, textiles and medical devices sectors, which depend heavily on the US market for exports, will also be taking a big hit. For instance, the US is the biggest market for generic medicines manufactured by the Indian pharmaceutical companies. Nearly 40 per cent of generic medicines used in the US are produced in India. This shows the importance of the US market for the Indian pharmaceutical companies.

Fortunately, Trump has not turned his attention towards the software sector. If he says software being used in the US should be developed in that country only, most Indian tech companies including TCS and Infosys will run out of business within no time. For they survive on cost arbitrage- getting business in dollars from the US market and paying salaries in rupees in India.

Even several US-based tech majors, including Microsoft and Google will also land in trouble as these companies have large technology development centres in India. So, the adverse impact of the US tariff war will be much higher on India if Trump puts the software sector in the firing line.

But the impact of the decisions taken by the Trump administration so far is not small as is evident by the turmoil in the Indian stock market. Key stock market indices nosedived by around 14 per cent this year so far. Foreign institutional investors (FIIs) pulled out more than $15 billion from the Indian markets in 2025 alone. And stock market investors lost a whopping $1.3 trillion. Things may change if India works out a trade agreement with the US in the near term.

But the global trade war unleashed by Trump provides ample opportunities for India and its companies to expand the horizon in the overseas market if the Indian government enters trade pacts with other affected countries. However, such agreements take their own time. So, it’s going to be a testing time for the Indian economy amid the escalating US-led trade wars. The continuous downfall in the markets amply reflects that. This remains a cause for worry.

For his part, Donald Trump is behaving more like an emperor with a corporate touch! Elon Reeve Musk, the billionaire who runs Tesla and is the key member of Team Trump, is adding his bit to the intrigue.

Will the US and with it the world, will be able to tackle challenges posed by an unpredictable President and his core team? It’s not easy to guess.