Tariffs, Tech, and Trade Wars: Why India Must Fight Fire with Strategy

The international economic order has moved from predictable rules to rapid, strategic pressure. In 2025, the United States implemented a sweeping reciprocal tariff regime, raising duties on certain Indian exports from 25 percent to as high as 50 percent, citing New Delhi’s energy ties and other policy choices. Trade talks that were scheduled for late August were canceled as the U.S. signaled a willingness to sustain pressure rather than negotiate a quick compromise.

India reacted quickly by accelerating a tax and consumption stimulus package designed to protect demand and support vulnerable industries. These developments are not isolated incidents. They mark a structural change in how major powers use trade and finance as instruments of geopolitical power.

The new playbook that other powers are using

Major countries are no longer relying on market access alone to secure an advantage. Instead, they are combining subsidies, export controls, targeted tariffs, and industrial policy to lock in domestic champions and shape global supply chains.

• In the United States, political actors have used executive authority to offer broad subsidy packages and change tariff schedules with short lead times.
• Europe is increasingly tying trade policy to climate and compliance standards that function as market access screens.
• China continues to subsidize strategic industries while expanding its industrial footprint through trade and investment.

For India, this new playbook means that old assumptions about benign globalization no longer hold. Policy must be designed to protect strategic autonomy while preserving investor confidence. India has already begun mitigation measures, including market diversification and front-loading exports ahead of tariff deadlines. These are resilience measures rather than an offensive strategy.

Why India cannot afford to stay neutral or merely reactive

There are three converging risks if New Delhi remains passive:

1. The direct economic hit. Analysts estimate that persistent tariffs at current levels could cost India tens of billions in exports and shave off a meaningful share of GDP growth.
2. The structural risk to industrial strategy. If strategic suppliers, especially in semiconductors, AI infrastructure, and critical inputs, remain outside India’s control, entire value chains will be vulnerable to cutoffs or punitive costs.
3. The reputational and investment signal. Global capital judges clarity and conviction. Indecision in the face of calibrated pressure encourages firms to defer or relocate large manufacturing projects because policy risk becomes a core part of the business case.

Together, these effects are not a temporary nuisance. They could set back decades of industrial momentum if not met with credible countermeasures.

What smart aggression looks like in practice

Smart aggression means calibrated, reversible, and economically sensible responses that raise the political and economic cost for the initiator while protecting Indian consumers and firms.

1. Establish a tiered reciprocal tariff framework that is transparent and narrowly targeted. Tariffs should be applied where substitution is feasible and where political constituencies in the partner country would feel the impact.
2. Massively scale trade resilience financing. This means immediate export credits, expedited duty remission, priority GST refunds, concessional lending for logistics upgrades, and insurance for exporters forced to redirect shipments.
3. Accelerate industrial policy where the return on strategic autonomy is greatest. This includes semiconductors, advanced packaging, AI compute clusters, data centers, battery manufacturing, and solar and grid infrastructure. Public capital must be deployed alongside private co-investment vehicles and production-linked incentive structures that are time-bound and outcome-oriented.
4. Stitch together a pragmatic diplomatic package that pairs market access promises with firm conditionality. Trade and investment openings should be offered to partners only in exchange for reciprocal stability commitments that are verifiable.

These policies build leverage and create a pathway to de-escalation if counterparts choose to negotiate. The point is to be prepared to defend India’s markets without triggering avoidable inflation or supply shocks.

BRICS as a strategic lever, not a rhetorical novelty

BRICS presents India with concrete instruments to blunt coercive pressure and expand strategic space. At the 2025 BRICS Summit, India pushed a resilience and innovation agenda emphasizing development finance, governance reform, and technological cooperation.

• The New Development Bank can underwrite cross-border infrastructure that reduces dependence on Western financial conditionalities.
• BRICS partners are exploring alternatives to dollar-centric settlement systems through increased bilateral currency use and interoperable payment mechanisms. These will not replace the dollar overnight, but they provide insurance against financial weaponization.
• India can use BRICS to accelerate complementary supply chains. For example, in critical minerals trade, joint R&D in energy transition technologies, and shared data center and cloud infrastructure.

To make BRICS effective, India must lead on governance, shape bank lending priorities toward projects with high technical content and export potential, and avoid allowing any single member to dominate agenda-setting. Managed properly, BRICS becomes both a shield and an amplifier, enabling India to diversify markets, reduce bilateral vulnerability, and gain diplomatic leverage in negotiations with the United States and Europe.

A new global narrative that India must construct

Words alone will not protect factories or markets. Narrative shapes politics. India needs a public and diplomatic story that ties immediate economic relief to a longer-term industrial mission. That narrative should make three commitments clear:

1. India will defend its strategic industries and supply chains through targeted policy and investment.
2. India will not close its markets but will insist on fair competition backed by reciprocity.
3. India will lead pragmatic multilateral coalitions that produce alternative financing, trade pathways, and technology partnerships.

The goal is to move global perception from seeing India as a pressure point to seeing India as a power node with credible tools, partners, and domestic capabilities. Such perception changes how investors allocate capital, how partners negotiate access, and how adversaries calculate costs.

Concrete next steps for policymakers and corporate leaders

For policymakers, immediate actions include announcing a transparent tariff response playbook with clear triggers and sunset clauses, creating a strategic export resilience fund to finance reorientation costs, and fast-tracking semiconductor and AI compute projects with anchor private partners.

For corporate leaders, actions include stress-testing supply chains against a 50 percent tariff shock, diversifying sourcing and markets on a defined timetable, and accelerating localization where it makes economic sense.

For both government and industry, a shared data room should be established to publish non-classified analysis of sectoral exposure so that decisions remain evidence-driven and targeted at the most vulnerable nodes. Finally, BRICS and other middle-power coalitions should be used to develop joint investment vehicles and pooled procurement for strategic inputs to reduce unit costs and increase bargaining power.

India’s moment to be passive is over

The protectionist world will not wait for polite appeals or WTO arbitration to deliver timely relief. Strategic assertion, disciplined economic intervention, and smart multilateralism are the tools that can convert a short-term crisis into a durable long-term advantage. The choice before India is simple: continue to be shaped by others, or shape the rules while protecting growth and industrial opportunity.

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