NEW DELHI, India— After President Donald Trump unexpectedly announced a 25% duty on Indian imports, the government in New Delhi is apparently looking into diplomatic and economic ways to calm things down, according to those who know what they’re talking about. For now, the Indian government has decided not to take any immediate action in response. Instead, they want to keep talking and make sure that trade talks between the two countries don’t fall apart.
Officials in New Delhi were “shocked and disappointed” by Trump’s unexpected decision, which was followed by negative comments about India’s commerce with Russia and its economy. Even while the government is using harsh language, it is focusing on a measured reaction and is actively seeking for ways to buy more from the U.S. to reduce the trade imbalance and calm the White House.
One of the ideas being looked at is increasing the amount of American natural gas, communication equipment, and gold that is brought into the country. Officials think that if these purchases go up a lot, it might help India lower its trade surplus with the U.S. during the next three to four years. But there is still one big problem: India does not plan to buy more expensive defense equipment, such the F-35 stealth fighter fighters, which Trump specifically asked for. The Modi government would rather work with other countries to design and make defense equipment in India.
The government’s plan to not retaliate is a well-thought-out one. Piyush Goyal, the Minister of Commerce, spoke to Parliament on Thursday. Just a few days before, he had said he was sure he could get a trade deal. He said the government is “studying the implications” of the tariffs and is talking to exporters and industry groups. He went on to say that India is still working hard to get a “fair trade deal” that safeguards the rights of its farmers, entrepreneurs, and small enterprises.
The choice not to retaliate right now is in line with the World Trade Organization’s (WTO) ability to impose counter-tariffs on U.S. taxes on steel and cars whenever it wants. This means that India is keeping its options open and may take action in the future if necessary.
The trade problems right now are a big test for the relationship between President Trump and Prime Minister Narendra Modi, who have been friends and said they were hopeful about a trade deal. But Trump’s latest comments, in which he not only attacked India’s high tariffs but also threatened penalties for its links with Russia, have made things more tricky. U.S. Treasury Secretary Scott Bessent reiterated similar frustration, telling CNBC that the “whole trade team has been frustrated” with New Delhi and blaming India for not being a “great global actor” owing to its connection with Russia.
There are different opinions among analysts about what Trump’s aggressive posture means. Some people, like international trade expert Abhijit Das, think it could be a way to get what he wants, like he has done with the European Union. But some people are worried that the tariffs and harsh words could hurt the long-term strategic alliance between the two countries, which has been important for both of their interests in a changing geopolitical context.
After the news, the Indian stock market and currency were a little unstable, but the drops weren’t very big, which suggests that the market might be waiting to see what happens. A U.S. delegation is still slated to go to New Delhi later this month to continue trade discussions. Everyone will be watching to see if New Delhi’s measured approach and proposed concessions will be enough to change Trump’s mind and stop a full-blown trade war.