US Out To Punish India
By Shivaji Sarkar
The weaponizing of tariff runs deeper than it appears. When US Treasury Secretary Scott Bessent described India–US ties as “very complicated and not over the Russian oil,” he signalled something grave: retaliation. The message is blunt — punish a defiant India that refuses to open its farm, dairy, and other sensitive markets. The result is the imposition of an additional 25 per cent tariff, doubling the blow to 50 per cent.
This isn’t about oil. It’s about disciplining the world’s most populous country and its vast consumer market. Washington’s strategy is clear: force New Delhi into submission, with Bessent boasting of “full support from our European partners.” That raises the stakes for India’s ongoing free trade talks with the EU, as Brussels comes under US pressure.
The mindset is stark: nothing short of total compliance will do. In effect, India is expected to play a servile partner — or face the consequences. History offers parallels. The US once wielded such pressure against Latin American countries. It did machinations against India during and after the 1971 Bangladesh war under the Henry Kissinger doctrine. It has many gory remembrances. Now it is promoting rogue regimes through Mohd Yunus in Bangladesh and General Asim Munir in Pakistan.
Bessent’s warning that President Donald Trump “will not budge on tariffs if India doesn’t” reinforces the hard line against India. Trump himself is quiet as minions continue to vilify India. The US administration broadened its crackdown on travel, business and students’ visas, alleging that India was the biggest misuser of visas.
India knows that it’s a wider game where it hits jobs, exports but the tone and tenor of the big brother may indicate more. The 50 per cent levy slams 70 per cent of India’s U.S. sales, slicing exports from $87.3 billion to $49.6 billion, and already shuttering Tirupur, Noida and Surat plants. Prices jump 35 per cent, shaving 0.5 per cent off GDP. Yet China, bigger Russian-oil buyer, stays tariff-free as Trump pursues Vladimir Putin. That’s theatre, not strategy.
The consequences are already visible. The Sensex shed 1,828 points in three days, wiping out Rs 7 lakh crore in value; over the past two months, stock losses have exceeded Rs15 lakh crore. Export-oriented sectors — textiles, handlooms, gems and jewellery, leather, and marine products — are reeling. The slowdown in export-oriented sectors, despite a shifting to electronics and engineering may cost a fortune. Yet, India still struggles to leverage critical technology transfers in areas like jet propulsion, metallurgy, and nuclear systems for decades despite the India-US nuclear deal in 2008.
Washington does not allow entry of India-made cars. India exports cars to numerous countries, with major destinations including South Africa, Mexico, Saudi Arabia, the United Arab Emirates, Chile, and, more recently, Japan, signalling India’s growing role as a global automotive production hub. Other key markets for Indian-made vehicles include Africa, the Middle East, Southeast Asia, and parts of Europe.
The government is pushing a ‘Swadeshi’ mantra to reduce the economy’s reliance on exports, with Prime Minister Narendra Modi calling on Indians to be “vocal for local” and buy Indian goods on August 26, 2025. Anything produced locally is the new swadeshi, Prime Minister Narendra Modi says. India and the U.S. are negotiating a bilateral trade pact (BTA) since March. So far, five rounds of talks have been completed. The U.S. team postponed its scheduled August 25 visit to India.
The government is pitching “vocal for local” and swadeshi production as the antidote, with Modi urging Indians to buy local goods. (It has not yet acted against online American retail giants). Simultaneously, India is scrambling to diversify close to $60 billion worth of exports once US-bound. Targets include Europe, Japan, Korea, and Australia, though success will demand long-term strategies, buyer exploration, and overcoming non-tariff barriers.
India has signed 13 FTAs, including with ASEAN, EFTA – Iceland, Liechtenstein, Norway, and Switzerland, the UAE, and Australia, while talks with EU are underway. But the differential US tariffs that favour competitors like Vietnam, Bangladesh, China and Turkey — all under the 20 per cent tariff line — mean India risks losing ground in marine products, textiles, and more. Winning back lost markets could be even tougher. The UK FTA, a contrast with the US, will waive tariffs on 99 percent of Indian exports, significantly boosting Indian manufacturers and potentially leading to a substantial Indian trade surplus.
On the ground, the impact is severe. Textile units are stalling new orders. Leather workers, gem cutters, and shrimp processors face wage cuts and job losses. The poor, dependent on low-paying jobs in these sectors, bear the brunt. Rural demand is holding up thanks to recent good monsoons, but urban export-linked industries face a sharp downturn.
India’s challenge is not only to withstand Washington’s tariffs but also to rethink its economic playbook. Reliance on foreign brands, lack of indigenous brand-building, and dependence on unstable global demand have left vulnerabilities. The path forward may lie in building strong local brands and developing resilient, diversified markets. What can India do? Look for alternate markets? Develop ‘make in India’ or experiment?
It has to give up lop-sidedness in brand building. ‘Maruti’ evolved as a brand. Lack of farsighted approach led it to be subsumed by Suzuki through different Indian regimes allowing dilution of its stake. Stable policies are needed to create new markets, a strenuous task.
Producing a battery car that the US is abandoning is not a solution for India even if made by a top brand in India. Battery often called the toy car is yet not a solution with battery itself being a problem. Battery leading to more imports and strategic dependence is not a viable solution. It has to promote the ICE engine vehicle producing companies and ancillaries.
India has to go back to its diesel, which it sells to Europe. It is inexpensive, easily available better than ethanol and with imagination could be sold at half the present price, as the country is doing to some neighbouring countries.
Bessent may soothe by saying, “at the end of the day, we will come together,” but the immediate reality is harsher. India is staring at tariffs that could reset trade dynamics for years, testing its resilience as it negotiates between protectionism abroad and self-reliance at home. — INFA