India isn’t flinching: Why Trump might be misreading India’s tariff playbook

India's banal market showed small motion of panic a time aft the U.S. announced a 50% tariff connected goods from the state and threatened secondary sanctions implicit its continued lipid commercialized with Russia.

The Sensex, the benchmark scale for India's blue-chip stocks, was down 0.8% arsenic of 1:50 p.m. Mumbai clip (4:20 a.m. ET) connected August 7.

From bureaucrats to businesses, there's a wide statement successful India that the latest escalation from the U.S. is lone a unit maneuver to fast-track commercialized talks. However, Indian Prime Minister Narendra Modi present has thing helium didn't have, adjacent a time earlier: the enactment of the Indian absorption to propulsion back. 

Rahul Gandhi, the person of India's largest absorption party, the Indian National Congress, described the punishment for Russian lipid purchases arsenic "economic blackmail" by Trump, further reducing the governmental country for Modi to concede to American demands. 

Consequently, the Indian negotiators' resoluteness whitethorn lone get stronger, particularly successful talks implicit areas that straight impact the country's farmers.

"India volition ne'er compromise connected the interests of the country's farmers, fishermen, and livestock breeders. I cognize it volition outgo maine personally, but I americium ready," Modi said connected Thursday morning, hours aft the U.S. accrued tariffs.

By astir estimates, the outgo of losing commercialized with the U.S. is important for India but not debilitating.

The astir pessimistic estimation is from Morgan Stanley. It says that if each goods are taxable to a 50% duty, the interaction connected India's gross home merchandise is apt to beryllium 60 ground points, astir $23 cardinal astatine existent speech rates.

On the different hand, the outgo of allowing U.S. dairy exports into India — 1 of the astir contentious issues— is expected to outgo India 1.8 lakh crore rupees ($20 billion) alone, according to SBI Research, a portion of the country's largest bank. A small implicit fractional of that load volition deed farmers straight successful the signifier of falling retail prices, SBI said, unless the authorities compensates for the loss.

Indian exports to the U.S.

The further tariffs could besides beryllium catastrophic for India's gem and jewelry companies, a spokesperson for the manufacture lobby told CNBC-TV18 connected Thursday, portion Indian seafood exporters, who merchantability the bulk of their nutrient to the U.S., whitethorn suffer astir $3 cardinal a twelvemonth astatine the 25% tariff effectual today, according to analysts astatine Morgan Stanley. 

India's labour-intensive textile industry, meanwhile, expects $5 cardinal worthy of concern to determination distant from India successful the adjacent fewer months owed to the tariffs. 

High U.S. duties volition besides impact India's quality to pull overseas nonstop concern (FDI), according to Arvind Sanger from Geosphere Capital Management, a New York-based broker.

India's presumption is bolstered by the information that implicit 60% of its GDP comes from home consumption, however. 

The Indian rupee volition beryllium the contiguous casualty, according to Mahesh Patil, who oversees much than 3 lakh crore rupees ($35 billion) worthy of fiscal assets astatine the Mumbai-based Aditya Birla Mutual Fund arsenic its main concern officer. However, Patil besides noted that the rupee settling astatine little levels against the U.S. dollar whitethorn offset immoderate of the deed connected Indian exporters, and the interaction whitethorn beryllium disposable with a lag of a fewer months.

A snapshot of India’s commercialized with the U.S.

Amid Trump's menace of secondary sanctions connected India, Modi is readying his archetypal sojourn to China since 2018. And, adjacent connected the heels of U.S. envoy Steve Witkoff, India's National Security Advisor Ajit Doval is visiting Russia successful an effort to prosecute India's interests done diplomacy.

Meanwhile, India's overseas ministry has deed retired astatine what it calls U.S. hypocrisy successful ignoring its ain commercialized with Russia that has continued done the warfare successful Ukraine, an allegation that Trump brushed speech but didn't deny. It's besides important to enactment that Indian companies ain stakes successful galore Russian lipid fields. 

Trump's commercialized advisor, Peter Navarro, has besides alleged that India uses the dollars from commercialized with America to wage for Russian oil, nevertheless astir of India's lipid commercialized with Russia is settled successful dirhams, the currency of the United Arab Emirates (UAE), refiners person told CNBC-TV18.

India has been a batch much consenting than Brazil and China to find a mediate crushed with the U.S.

The authorities has already reduced duties connected imports of U.S. motorcycles, bourbon, ethernet switches, synthetic flavoring essences and food hydrolysate, to sanction a few. It has besides allowed Tesla to acceptable up store successful Mumbai and withdrew the equalization levy connected net giants, wide known arsenic the Google tax.

India has besides accrued its lipid purchases from the U.S. by 120% successful the past six months, source successful the Indian authorities told CNBC-TV18, which was 1 of Trump's superior demands erstwhile Modi visited the White House successful February 2025.

However, since then, Trump has moved the goalposts from conscionable reducing the U.S.' commercialized shortage with India to the South Asian country's narration with Russia. 

Trump has said India's purchases of Russian lipid are wherefore it's present facing tariffs of 50%, with this afloat complaint owed to beryllium imposed 21 days aft Trump's enforcement bid was signed Wednesday.

Despite this, New Delhi's code and rhetoric person been milder than the statements coming from Beijing oregon Rio De Janeiro, but it's besides sticking to its reddish lines. India is keen to usage the 21 days earlier to find a win-win situation, a authorities authoritative told CNBC-TV18.

While the Indian authorities hasn't hinted astatine immoderate escalation connected its end, immoderate experts judge that India has immoderate ineligible options astatine its disposal.

"It is important that we speech to our trading partners and like-minded countries who person been deed by akin actions by the U.S.," Anjali Prasad, the erstwhile Indian ambassador to the World Trade Organization, said. 

"Only erstwhile we get together, determine connected a strategy, volition determination beryllium immoderate enactment efficaciously possible, due to the fact that determination is spot successful numbers."

The information that Trump is owed to conscionable Russian President Vladimir Putin in the coming days, meanwhile, shows that the U.S.' precedence is to extremity Russia's warfare connected Ukraine.

If there's a breakthrough successful talks betwixt Trump, Putin, and Ukrainian President Volodymyr Zelenskyy, India's lipid purchases from Russia mightiness nary longer beryllium a problem.

The inducement for India to ticker and wait, alternatively of rushing with concessions, is close there.

— Parikshit Luthra, Delhi bureau main astatine CNBC-TV18, contributed to this report. 

Sriram Iyer leads CNBC-TV18's integer squad arsenic enforcement editor. He has implicit 18 years of acquisition crossed some Indian and planetary outlets, ranging from The Indian Express to Reuters and Business Insider India.