Seven Possible Endgames for India in the US Tariff Standoff

India marks its Independence Day this year under the shadow of a bruising trade confrontation with Washington. The Trump administration’s decision to slap a 50% “country-specific” tariff on most Indian goods, on top of existing Most Favoured Nation duties, has thrust New Delhi into a strategic dilemma that could reshape its trade, energy, and diplomatic positioning.

The choices ahead are stark: negotiate, retaliate, diversify markets, or trade concessions such as ending purchases of Russian oil for tariff relief. Each path carries a different mix of gains, risks, and market consequences, and the decisions taken now will shape both the economy and India’s role in the global order.

Seven Possible Endgames
Russian oil no longer a US issue: If the US and Russia end the war or India halts Russian crude imports, Washington could drop its extra 25% levy, bringing total tariffs on Indian goods down from 50% to 25%. Giving up discounted Russian oil would cost India about $10 billion a year, but export losses could shrink from $50 billion to $30 billion, leaving it $20 billion better off overall. The catch: any promise from Washington must be binding and permanent. Probability: 10%.

Status quo, no US–India deal: India keeps buying Russian oil, and US tariffs stay at 50% above MFN levels, pushing total duties on some goods beyond 70%. Petroleum, pharmaceuticals, and smartphones are spared, but labour-intensive exports like apparel, shrimp, carpets, furniture, jewellery, and machinery could lose 80–90% of their US market. Annual losses could top $50 billion, with significant job cuts for small and medium enterprises. Probability: 30%.

Diversify away from the US: India absorbs the tariff hit but accelerates exports to Europe, ASEAN, Africa, the Middle East, and Latin America. Gains in the first two years might recover only $10–15 billion of the $50 billion lost, requiring structural reforms and aggressive trade diplomacy to be sustainable. Probability: 10%.

Trade deal with the US, no Russian oil: New Delhi and Washington sign a deal: India stops buying Russian oil, and US tariffs fall to around 15%. In return, India grants duty-free entry to up to 95% of US goods and commits to buying $50 billion in American oil, gas, and defence products. Export losses drop to about $15 billion a year, but India risks overdependence on the US for energy and defence. Protecting farm tariffs, rejecting patent “evergreening,” preserving digital sovereignty, and limiting foreign access to government procurement would be essential. Probability: 25%.

Retaliation and WTO dispute: India raises tariffs on US exports such as almonds, apples, and machinery, and files a WTO complaint. But with the WTO appeals body stalled, enforcement is uncertain. Washington could retaliate against Indian IT, defence, and services exports. Probability: 5%.

US court strikes down tariffs: In May, the US Court of International Trade ruled Trump’s tariffs illegal, saying the law used didn’t permit such sweeping measures. The government is appealing, and duties remain for now. If the ruling holds, rates would revert to pre-April 2 levels. The risk: Washington could craft new legal grounds for fresh tariffs. Probability: 10%.

US inflation and job losses trigger rollback: If tariffs raise consumer prices and unemployment in the US, domestic political pressure could force a cut to around 15% for all countries. India’s best role here is to quietly highlight the tariffs’ cost to American voters. Probability: 10%.

The swiftest and least costly resolution for India would be a court decision that erases the extra duties. The most balanced negotiated option is the US trade deal in Scenario 4 of the trade deal and no Russian oil, provided India safeguards key sectors. However, in the near term, the most likely outcome is Scenario 2, which involves no deal, no change, and sustained 50% tariffs. In that case, New Delhi will need to cushion MSMEs with low-cost credit, targeted export incentives, and rapid market diversification to soften the blow.

Holding the line
Major powers such as the EU, Japan, South Korea, and the UK have already accepted one-sided US trade terms. Only China and India have pushed back, and India has done so without Beijing’s vast leverage. That resistance comes with costs. The path ahead demands a cold-eyed, strategic mix of negotiation, diversification, and domestic fortification. The goal is to protect jobs, preserve competitiveness, and defend strategic autonomy.

In an era when economic power is used as a weapon, survival is not about avoiding confrontation. It is about picking the right battles, anticipating the next move, and playing for the long win.