Why India Won’t Blink in the Face of US Trade Pressure

Despite louder social ‘Truths’ proclaiming a ‘dead’ Indian economy amidst the deepening US-India trade standoff, the sky has decidedly not fallen. Even as US tariffs and penalty rhetoric become more ominous, India’s response remains dignified.

India, like other BRICS countries (Brazil, Russia, China, South Africa), has been affected, though not uniquely targeted. It has managed to avoid capitulating with sweeping concessions or crossing its red lines, unlike some self-proclaimed defenders of the ‘rules-based’ trading order. 

While a 25% tariff appears drastic in isolation, trade is a matter of relative competitiveness. For India, the additional burden places it at a 5-6% disadvantage compared to competitors like Vietnam or Indonesia. However, it remains in a stronger position compared to Mexico, and even more so vis-à-vis Bangladesh, Thailand, and Cambodia. This is far from catastrophic, particularly if India continues to embed itself into global value chains.

Strategic Cushion
Perhaps India’s most underappreciated strength is its large and relatively self-sustaining domestic market. In 2022-23, India’s total exports were approximately $775 billion, accounting for around 22% of the country's GDP. Exports to the US totalled roughly $78 billion, just 10% of India’s total exports and under 2.2% of its GDP.

So, while the US is a significant trading partner, India’s economic health is not disproportionately tied to the American market. Unlike more export-dependent economies, India retains strategic space to manoeuvre without submitting to pressure.

Restraint Under Pressure
Another key strength lies in what India has not done. New Delhi has resisted offering zero-duty market access or entering questionable trade-offs under pressure. 

It has preserved policy space, including on intellectual property rights, refrained from binding purchase commitments, and avoided accepting terms clearly adverse to its entrepreneurs, agricultural sector, and SMEs. 

This restraint has helped India avoid the kind of overexposure and dependency traps into which some countries fall during difficult trade negotiations. On more than one occasion, both sides have published divergent read-outs, unable to accept Trump’s MASALA deals as settled fact the very next day.

India’s participation in GVCs continues to grow in sectors like pharmaceuticals, IT services, automotive components, and textiles. It remains a key supplier of active pharmaceutical ingredients and generic medicines to global markets, including the US. It has also become a crucial backend hub for Fortune 500 companies in digital services. 

In electronics, India is an emerging assembly and manufacturing hub, drawing investments from Apple, Foxconn, and Samsung. These corporations would themselves have strong incentives to push for lower Trump tariffs. As long as India remains integrated into these value chains, a moderate cost differential is unlikely to trigger sudden supplier shifts, especially when other competing economies face equal or greater pressures.

Energy Realpolitik
One emerging flashpoint is energy. The issue of sanctions or penalties for importing Russian oil remains a grey area. Given the ephemerality of US policy positions, India must weigh the ‘penalties’ pragmatically and keep its options open. So far, by leveraging both discount opportunities and alternate payment mechanisms, India has secured energy without compromising strategic autonomy. Oil flows, ultimately, where it is needed, defying simplistic political framing.

Leverage and Realignment
Looking ahead, India must work to consolidate and wield whatever levers it has with the US system. Its influential diaspora, well-placed in academia, think tanks, trade chambers, state governments, and on Capitol Hill, can help counterbalance Washington’s myopic transactionalism.

This moment could also catalyse real coordination within BRICS. All five founding members have faced US trade pressure. That shared experience could drive more purposeful alignment—on trade defence, standards, and strategic autonomy frameworks.

The US-India trade relationship is certainly under stress, but India is far from cornered. With its measured response, resilient market, and refusal to concede prematurely, India has proven that calm, not compliance, is the better long game.

In a world where many have folded under economic coercion, India’s current refusal to blink is not just commendable, it is strategic.