Unlike China or Canada, India hasn't slapped retaliatory tariffs or initiated WTO dispute against US protectionism; Indian exporters face annihilation in US market
US President Donald Trump, operating with the brazen tactics of a “mafia boss,” has unleashed a devastating predatory tariff of 50 per cent against India and Brazil. The starkly contrasting responses from these nations reveal a tale of strategic defiance versus paralysing inaction.
Brazil has fought back aggressively, filing a comprehensive trade dispute against the United States at the World Trade Organisation (WTO) while strategically reserving its right to impose retaliatory measures on American products.
“The US is trying to impose on Brazil a solution which is constitutionally impossible,” Brazil’s Finance Minister Fernando Haddad said in an interview at an FT Live-Times Brasil/CNBC conference in São Paulo. “An impasse has been reached, it’s a request which cannot be fulfilled.”
India’s non-confrontational attitude
In stark contrast, the Indian government under Narendra Modi has remained conspicuously silent, refusing to challenge Washington's unilateral and allegedly illegal tariffs at the WTO by launching a trade dispute till now.
New Delhi has displayed no appetite for retaliation against American products, even as it paradoxically strengthens its partnership with Russia while attempting a diplomatic thaw with China.
Watch: Trump's tariff tirade: Can India weather the storm? | Talking Sense With Srini
With the catastrophic 50 per cent tariff on Indian exports to the US set to take effect on August 29, the Modi administration appears to be scrambling desperately. The once-ambitious vision of a MEGA trade agreement—built on the equation MAGA (Make America Great Again) plus MIGA (Make India Great Again) and targeting $500 billion in trade turnover within five years—has spectacularly collapsed into the reality of MEGA - MIGA = MAGA.
Indian exporters now bear the brutal brunt of this diplomatic failure. They face annihilation in the American market as competing nations systematically seize market share from India. Despite frantic attempts to pivot to alternative markets like Russia, the prospects remain bleak.
Collapse of MEGA trade deal
The US has dealt another devastating blow by coldly suspending the sixth round of Bilateral Trade Agreement negotiations, effectively demolishing any hope of a near-term trade détente. Positions on critical issues – particularly opening India's market for heavily subsidised American farm and dairy products – have calcified along political lines, leaving no room for compromise.
While India has temporarily exempted import duties on cotton until September 30, ostensibly to assist garment exporters, these token gestures are woefully inadequate compared to the existential threat facing Indian exporters.
In a blistering Financial Times op-ed on August 18, White House trade counsellor Peter Navarro launched a vicious attack on India's oil lobby—specifically targeting the Ambani refineries in Gujarat—accusing them of sustaining Russian President Vladimir Putin's war machine. His incendiary narrative of "Russian crude refined and resold globally by Indian profiteers in league with silent Russian partners" reeks of selective outrage and political coercion.
Also read: Anti-Bangladeshi drive, Trump tariff: A double whammy for Bengali migrants in Gujarat
Selective outrage
Conspicuously absent from Navarro's indictment are other major purchasers of Russian crude like China, or Western nations quietly purchasing Russian petroleum products. Instead, he recycled the familiar Trumpian accusation that "India imposes some of the highest average tariffs in the world, along with a dense web of non-reciprocal barriers that punish American workers and businesses."
US Treasury Secretary Scott Bessent escalated the issue further, suggesting India's richest families are the primary beneficiaries of Russian oil imports. It remains uncertain whether India's Ministry of Petroleum and Natural Gas will mount a robust defence against these explosive allegations.
The Modi government's contradictory positions betray profound confusion. While drawing red lines against opening India's farm and dairy sectors to American imports, it permitted Niti Ayog to advocate for opening all sectors—including agriculture—with near-zero tariffs.
Any competent administration would have summarily dismissed officials proposing such economically suicidal policies that disregard India's complex socio-economic realities.
Will circumventing WTO help?
India now finds itself trapped in an unprecedented crisis. Despite the US setback, the government continues its hollow rhetoric about aggressively pursuing free trade agreements.
A former Indian trade envoy to the WTO has recommended accelerating bilateral negotiations with the European Union, New Zealand, and even the CPTPP (Comprehensive and Progressive Trans-Pacific Partnership)—a Barack Obama initiative designed to circumvent the WTO in 2008.
Yet, these potential partners face rapidly changing conditions and are implementing their own protectionist measures, like the EU's Carbon Border Adjustment Mechanism and deforestation regulations, offering little relief.
Also read: Book excerpt: US tariffs and why Donald Trump’s economics don’t add up
Imperial preferences
Under the much-revised imperial trade preferences reminiscent of the 19th century colonial powers, Trump has imposed punishing tariffs: 30 per cent on all South African goods, 25 per cent on Indian exports (escalating to 50 per cent by the month's end), and 50 per cent on Brazilian goods. These measures, ostensibly rooted in the so-called Fair and Reciprocal Plan (FRP), are transparently contaminated by political considerations.
More alarmingly, these reciprocal tariffs flagrantly violate US obligations under Article I of GATT 1948 and Article II of WTO agreements, which enshrine non-discrimination and binding tariff commitments, as former South African trade minister Rob Davies has emphatically stated.
For all practical purposes, Trump's imperial preferences have suffocated the multilateral trading system and its custodian, the WTO. "The global trading system as we have known it is dead," writes Michael Froman, the former Obama administration's trade representative in the September/October issue of Foreign Affairs. "The WTO has effectively ceased to function, as it fails to negotiate, monitor, or enforce member commitments."
Froman suggests countries should embrace open and flexible plurilateral trade agreements, which merely serve to force smaller countries to align with the trade agenda of powerful members within these groupings.
Also read: Has Trump hinted at delaying retaliatory tariffs on India?
Politics over economics
The Trump administration boasted it would secure "90 deals in 90 days," yet it only reached agreements with the EU, United Kingdom, Cambodia, Indonesia, Japan, Malaysia, Pakistan, the Philippines, South Korea, Thailand and Vietnam – which account for merely 40 per cent of US trade.
Washington has yet to conclude agreements with three of its biggest trading partners—Mexico, Canada, and China. Furthermore, the imposition of tariffs appears driven more by political considerations than economic rationale, creating unprecedented uncertainty.
Consider South Africa that has been hit with a 30 per cent tariff based on two arbitrary factors: 10 per cent under the FRP and an additional 20 per cent punishment for Pretoria's ICJ case against Israel regarding alleged genocide in Gaza. Brazil, a country without a trade surplus with the US, faces a 50 per cent tariff largely due to the legal and constitutional travails of President Trump's ally, former Brazilian President Jair Bolsonaro, who was allegedly involved in a coup attempt.
For India, the planned 50 per cent tariff comprises 25 per cent retaliation for alleged refusal to grant market access to US agricultural products and 25 per cent punishment for purchasing discounted Russian oil.
Also read: Marco Rubio defends US policy as India faces sanctions, China spared on Russian oil
Is India serious about a lasting solution?
Unlike China or Canada, India has neither imposed retaliatory tariffs nor initiated a proper WTO dispute against American protectionism. India's foreign policy establishment appears disturbingly indifferent to taking any concerted action against the US.
It half-hearted engagement with BRICS and tentative rapprochement with China raises serious doubts about its commitment to finding constructive, lasting solutions to this deepening crisis within the Global South.
As the trade noose tightens, India stands at a critical crossroads—will it continue its passive, inconsistent approach, or finally develop a coherent strategy to navigate these treacherous economic waters? The stakes for Indian exporters and the nation's economic future have never been higher.
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