As India waits and watches, a plan is in the making to counter Trump’s tariff challenge

India is formulating an action plan to mitigate the risks of a potential trade war with the United States, said the people familiar with the matter, adding that the government is expected to unveil a comprehensive strategy in the coming months, contingent on the policy direction taken by the US administration.

This development follows escalating tariff disputes between the US and its key trading partners including Mexico, Canada and China with both sides imposing and countering tariffs in rapid succession.

“Inter-ministerial consultations are ongoing to identify products that may be subjected to US tariff. Efforts are underway to make industries aware of the potential impact,” The Mint quoted the sources as saying, who requested anonymity.

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As the world’s fifth-largest economy, India is focused on avoiding tariff increases, particularly on key export categories such as textiles, electronics, engineering goods and pharmaceutical products. These sectors have seen consistent export growth to the US, rising from $38.84 billion in FY22 to $46.43 billion in FY24, according to data from the Commerce Ministry.

During the ongoing fiscal year (April-December 2024), exports in these categories reached $37.05 billion, compared to $33.16 billion in the same period of FY24.

“Despite the existing uncertainties, our primary focus remains on strengthening domestic manufacturing to boost exports,” the first source told the Mint. They further emphasized India’s growing role in global trade and warned that any tariff escalation by the US could significantly disrupt bilateral trade relations.

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Notably, the US recorded a trade deficit with India amounting to $35.32 billion in FY24.

The US’s tariff hikes on Chinese imports could present an opportunity for India. “India is keen to leverage this opening, but much will depend on the course of action taken by the US,” the source told the Mint.

Trump’s broad tariffs announcement on Saturday sparked promises of retaliation. The announcement threatens upheaval across supply chains, from energy to automobiles to food.

China’s commerce ministry said in a statement it would take “corresponding countermeasures” and file a claim against Washington at the World Trade Organization.

Mexican President Claudia Sheinbaum announced that her country would impose retaliatory tariffs.

Canadian Prime Minister Justin Trudeau – who spoke with Sheinbaum – separately said his country would hit back with 25 percent levies of its own on select American goods worth Can$155 billion (US$106.6 billion), with a first round on Tuesday followed by a second one in three weeks.