Trump's tariffs: TK Arun decodes the big impact

The US government’s decision to impose a 26% tariff on Indian imports has sparked fresh concerns in New Delhi over the future of India’s trade. In an exclusive conversation with The Federal, senior journalist TK Arun breaks down the ripple effects of this move—not just for India, but for the entire global trading system. From inflation fears to World Trade Organization (WTO) breakdowns and shifting global supply chains, Arun highlights what’s at stake and why India must tread carefully.

Global trading system shaken

TK Arun begins by explaining that the US tariffs under Donald Trump’s administration are not limited to India alone. “Trump has increased tariffs across the globe,” he says, adding that certain categories such as pharmaceuticals have been exempted, which is a relief for India.

However, he argues that the real damage is to the global trading community itself. “The first casualty of the Trump tariffs is the global trading system,” Arun notes, referring to the collapse of the ‘most favoured nation’ principle under the WTO. “He has blown this to smithereens,” Arun says, warning that the WTO and its rules are now under threat—a development that could harm all countries, including India.

Indirect impacts and inflation

According to Arun, the US tariffs create not just direct consequences for Indian exports, but indirect ones as well. For instance, tariffs on steel imports mean that Chinese exporters will look for alternative markets—India being a likely destination. “India might be flooded with imports of steel from China,” he warns.

The policy unpredictability of the Trump administration, with its frequent changes in tariffs, also fuels uncertainty and inflation. “This might actually create persistent inflation,” Arun explains. Such inflation could push the US Federal Reserve to hike interest rates, triggering global monetary impacts. For India, that could mean raising tariffs or dealing with a depreciating rupee.

Unclear sectoral impact

When asked about which Indian sectors are likely to be hit the hardest, Arun offers a cautious view. “We don’t really know,” he admits. The situation is complex because the outcome depends on how tariffs affect competing exports from other countries.

One area where India might gain, he notes, is the garment sector. With the US imposing 37% tariffs on Bangladeshi exports, India could become more competitive in this space. “This actually improves the Indian export competitiveness in the case of garments,” Arun says.

Political optics vs economic logic

The interview also touches on India’s possible response to the tariffs. Arun advises against retaliation through higher tariffs. “We should not retaliate for the sake of retaliation,” he says. Doing so could harm Indian consumers and industries that depend on US imports, such as medical equipment and computer chips.

Arun points out that while other nations have pushed back against the US—China, Mexico, the EU—India has largely remained silent. Though this might dent Prime Minister Modi’s image, Arun argues that the move makes sound economic sense. “Political posturing will harm India’s economic interest,” he asserts.

Strengthening internal competitiveness

Despite the external challenges, Arun believes India can take internal measures to boost its competitiveness. Reducing logistics costs, investing in infrastructure, and paying better wages are key. “If you keep earnings down, naturally the market will not be large,” he observes, stressing the need for higher domestic purchasing power.

He adds that India has room to grow by improving policy, attracting investment, and leveraging its demographic advantage. “There is slack in the system. By exploiting this slack, we will be able to grow faster,” Arun says.

Protecting services and strategic patience

Arun emphasizes that India’s service exports, particularly IT and software, have not been affected by these tariffs. This is an area of strength and should not be jeopardised by harsh countermeasures. “We don’t want to endanger all this by talking tough,” he cautions.

Further, Arun believes these tariffs may not last beyond Trump’s term, as they are already hurting US consumers. “People don’t expect these tariffs to last beyond the four years that Trump is the President,” he says, calling the idea of manufacturing shifting back to the US largely unrealistic.

WTO crisis and a new opportunity

The interview concludes with a discussion on the WTO’s paralysis, particularly its non-functional appellate body, thanks to US obstruction. “The WTO is practically defunct,” Arun laments.

However, he sees an opportunity here. “India should work with BRICS countries to create a mini-WTO within the WTO,” he suggests—an effort to revive the rules-based global trading order and reclaim developing countries' space in global trade negotiations.

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