In November 2024, Donald J Trump’s fans in Delhi conducted prayers and a ‘havan’ for his success in the US presidential elections. The prayers worked well for Trump, as he recorded a historic victory, but not quite so for his Indian groupies. Less than a year later, following diatribes and the imposition of tariff, Trump is the subject of much disdain and memes on social media. It is not just Indians—more than half the adults in 19 of the 24 countries polled by Pew Research Center lack confidence in Trump’s leadership of world affairs.
Context changes everything—definitions, expectations and perceptions. This week, Trump’s tortuous tariff tantrums reached a new milestone as he signed executive orders. Predictably, stock markets tanked across the world—the Nifty50 slid by 200 points, Hang Seng by 265 points and Nikkei225 by 270 points. US benchmark S&P 500, which has been hovering at record highs, dipped 101 points and Nasdaq slid 472 points, leaving many tech barons poorer. Even Bitcoin tumbled to $115,000. The tariffs rattled currency markets, fuelling a rise in the stock markets ‘fear index’ aka VIX.
In India, the tariff shock and Trump’s tirade triggered a parade of rhetoric. There has been much lather about Trump describing India as a ‘dead economy’. Opposition leaders are required to calibrate their commentary. Rahul Gandhi displayed astonishingly poor judgement as he agreed with Trump and failed to make the distinction between his critique of the regime and the nation. Trump must be taken seriously, but not necessarily literally. Trump is not exactly qualified to characterise the Indian economy. India is the fastest-growing economy. Its destiny will be defined by Indians. The Truth Social post must be read simply as an expression of his frustration at India’s stance.
Trump cited the purchase of Russian oil by India as a cause for further penalties. This view impacts India’s right to energy security. The expectation also reeks of hypocrisy. The Energy Information Agency reveals the US imported uranium from Russia till recently and its companies can seek waivers till 2028. The EU parliament reveals that Russian gas imports will continue till the end of 2027. Recently, Nato chief Mark Rutte warned India of sanctions. Ironically, his country, the Netherlands, has imported Russian uranium. Indeed, it is reported that Russian company Rosatom channels uranium profits through the Netherlands.
Be that as it may, what exactly does the US want from India? The US wants India to accept American regulatory clearances as is, impinging on sovereign rights. It wants to export soya and corn, as also other genetically modified produce. This could be politically suicidal in India. Moreover, genetically modified crops are the subject of litigation in the Supreme Court. The US also wants India to allow in American dairy products. This is a threat to Indian farmers and triggers socio-cultural sensitivities given the use of animal protein as cattle feed by the US dairy industry.
The expectations will be hard to reconcile and define the pull and push factors when the teams of India and the US meet again on August 25. As the Americans say, a deal is not done till it is done! While we wait for the outcome of the talks, the 25 percent tariff has fuelled binary views. There are those who say it is “just a stumble” that will shave barely 0.2 percent off the GDP; and there are those who see it as a potential crisis. The truth is in between. The classic error folks make in assessing a situation or event is they overestimate the immediate impact and underestimate the long-term implications.
The impact of tariffs on smaller enterprises in the supply chain and labour-intensive export sectors such as jewellery and garments cannot be overstated. India’s calling card for ramping up manufacturing and exports was the China+1 thesis. It is essentially the hope of global companies sourcing supplies from China moving to India. The imposition of a 25 percent tariff could derail the ambition of attracting offshoring opportunities, since competing countries like Vietnam, Indonesia, Bangladesh and Sri Lanka have lower tariffs. It is also instructive to remember that the US is among the top three sources of foreign direct investment into India.
The tariff tantrums also signal lessons. The last major reforms were trade liberalisation and dismantling of the licence raj in 1991. Since then, India’s political class has taken refuge behind a strong consensus for weak reforms—in agriculture, labour laws and regulations. A TeamLease Regtech report reveals renewable energy projects require 799 unique compliances. In 2025, there are 621,000 tax appeals pending. The Economic Survey of 2024-25 lists critical areas—land, construction, labour, utilities and logistics—where the states control standards and permits, and impose rules and penalties. These mandates are stranded in the past.
The quest for strategic autonomy in trade and geopolitics demands governments eradicate the parasites haunting the domestic economy hosting 1.4 billion people. The rise of India’s GDP in the hierarchy of nations is welcome. Marketing the scale of the domestic market, however, calls for measures to boost per capita income.
The powerful are, this column has observed, also dependent. China's ability to push back on tariff tactics is not a fortuitous accident. It propelled change with reforms in agriculture, education, energy and investments to fuel growth. It has leveraged the dependencies of the US economy. India needs to redesign its economy to create dependencies that can be leveraged at the high table of geopolitics.
Read all columns by Shankkar Aiyar
SHANKKAR AIYAR
Author of The Gated Republic, Aadhaar: A Biometric History of India’s 12 Digit
Revolution, and Accidental India
(shankkar.aiyar@gmail.com)