Donald Trump’s decision this month to double tariffs on Indian imports to 50 percent marks the sharpest rupture in US–India trade relations in decades. The White House has justified the move as a response to New Delhi’s deepening energy ties with Moscow, particularly its continued purchases of discounted Russian oil. But the escalation risks misreading the strategic and economic calculus of Prime Minister Narendra Modi’s India—and in doing so, could undermine the very leverage Washington seeks.
The tariff war began in early August, when the US imposed a 25 percent duty on a broad range of Indian goods, citing “unfair trade practices” and Russian oil imports. On 6 August, President Trump signed an executive order adding a further 25 percent, to take effect three weeks later. Modi’s response was immediate and defiant. Calling the measures “unfair and unjustified,” he accused Washington of selective enforcement—noting that other major buyers of Russian oil, including Turkey and European states, faced no such penalties. He vowed to protect Indian farmers and industry, even at a “very heavy price.”
India has already paused certain planned purchases of US defense equipment and is reviewing its offers in ongoing trade talks. More significantly, officials are signaling that New Delhi will accelerate its engagement with alternative economic platforms—most notably the expanded BRICS grouping—to reduce vulnerability to US pressure.
A heavier hand in a changed chessboard
The economic landscape of 2025 is not that of 2005. With the recent addition of Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE, BRICS now represents a $30 trillion economy—roughly 30–40 percent of global GDP—and handles more than a fifth of world trade. Its collective weight offers the possibility, albeit still distant, of an alternative pole to Western-centric trade and finance.
The dollar’s primacy remains—it still accounts for around 58 percent of global reserves and payments—but it is more vulnerable to erosion than in past decades. India’s fast-rising trade with Russia, officially about $65–69 billion in 2023–24, is increasingly settled in rupees and roubles, bypassing the US currency. Each such arrangement, replicated across multiple trading partners, chips away at the dollar’s automatic dominance—and by extension, at the potency of US sanctions and tariff threats.
India’s weight in global supply chains further complicates Washington’s hand. It produces about 60 percent of the world’s generic drugs, exports some $28 billion in pharmaceuticals annually, and delivers $150 billion in IT and business services—much of it to American clients. Four million Indians work in the US technology sector, and over half a million STEM graduates join the workforce each year. Tariffs that curb Indian exports risk ricocheting into higher costs for American consumers, supply disruptions, and competitive setbacks for US companies.
The power of “optionality”
India’s real leverage lies in its “optionality”—the ability to cultivate multiple partnerships without binding itself fully to any single bloc. Modi has preserved close security ties with the US through the Quad while simultaneously acting as a principal architect of a more assertive BRICS. He can tilt towards Washington on Indo-Pacific security, deepen energy and defense ties with Russia, or engage Gulf states and African partners for trade and investment. Few other major economies enjoy this degree of diplomatic maneuverability.
This flexibility means that blunt economic coercion is less likely to work—and more likely to accelerate India’s diversification away from US-dominated systems. Historically, sustained tariff wars have triggered a measurable rerouting of trade within three to five years. In the current climate, those diversions would tend to benefit BRICS members and other non-aligned economies.
Why tariffs may backfire
Washington’s approach carries three distinct risks.
First, tariffs are a poor lever against a country with credible economic alternatives. Rather than forcing India back into compliance, they could incentivize faster adoption of non-dollar trade settlements, wider use of alternative payment systems, and more investment flows within the Global South.
Second, the domestic costs to the US could be politically damaging. Higher pharmaceutical prices, disruption to IT services, and pressure on sectors from agriculture to aerospace will not go unnoticed by American consumers or corporate lobbies.
Third, the policy risks reinforcing the very multipolarity the US is trying to forestall. Other neutral or semi-aligned countries—from Indonesia to Brazil—will read the India case as evidence that Washington’s trade measures are selective, politicized, and potentially avoidable through deeper South–South engagement.
A smarter alternative
None of this is to say that Washington lacks leverage. The US remains a critical market for Indian exports and a vital partner in technology, defense, and education. But the use of tariffs as the primary instrument of policy is more likely to alienate than to align.
A more effective strategy would blend engagement with targeted pressure. That means pushing forward on a long-stalled bilateral trade agreement; co-investing in areas of shared strategic interest such as semiconductors, clean energy, and pharmaceuticals; and offering supply-chain incentives that embed India more deeply in US-linked manufacturing. At the same time, the US could maintain calibrated, specific restrictions tied to clearly articulated policy goals, rather than blanket, emotional tariff hikes.
The strategic takeaway
The 50 percent tariff gambit has revealed less about Indian vulnerability than about Indian resilience. Modi’s government has the scale, economic diversity, and geopolitical reach to absorb short-term shocks and adapt. In doing so, it will hasten the emergence of a more plural global economic order—one in which Washington’s ability to set the rules is more constrained.
If the US believes that coercive tariffs will quickly bring India to heel, it may be misreading the board entirely. The likely result is not an India brought closer, but an India building around America—and in the process, helping to construct the very multipolar world Washington hopes to prevent.
