Anand Teltumbde
The 2025 Trump tariffs on steel, aluminium, textiles, and generic pharmaceuticals have sent a tremor through India’s export economy. Yet, to see these developments merely as a reaction to U.S. protectionism would be to miss their deeper significance. The tariff episode exposes the structural fragility of India’s economic model and the failure of a decade-long foreign policy built around personal charisma rather than institutional resilience. It reveals that behind the rhetoric of “Vishwaguru” and “Atmanirbhar Bharat,” India remains dependent on volatile global markets and power asymmetries that personalized diplomacy cannot mitigate.
The Myth of Personal Diplomacy
The fact of Modi’s and the BJP’s relentless hunger for power remains insufficiently commented upon. Since 2014, there has been no speech, no action, no movement, and no policy untouched by an overt or covert electoral calculation — a logic that extends even to the realm of foreign policy. From his first term, Narendra Modi styled himself as India’s chief salesman abroad — hugging heads of state, addressing diaspora rallies, cultivating what was marketed as a “personal equation” with leaders from Washington to Riyadh. The government’s narrative projected this as the new strength of Indian diplomacy, transcending the “bureaucratic inertia” of Nehruvian multilateralism.
However, the Trump tariff crisis has laid bare the limits of this approach. For all of Modi’s self-professed rapport with Donald Trump — from “Howdy Modi” to “Namaste Trump” — India’s economy has not been spared the brunt of U.S. protectionism. The reimposition of Section 232 tariffs on Indian steel and aluminium, the rollback of the Generalized System of Preferences (GSP) benefits, and the tightening of non-tariff barriers on pharmaceuticals demonstrate that personal chemistry does not translate into strategic immunity.
Unlike China, which diversified export markets and built bilateral supply-chain pacts across Asia, India remained dependent on the U.S. market for high-value goods while boasting of “global friendships.” This is not realpolitik; it is diplomatic vanity masquerading as vision.
Foreign Policy as PR, Not Strategy
India’s foreign policy under Modi has been hyper-visible but shallow. While the prime minister’s photo-ops in Washington or Paris drew headlines, the machinery of economic diplomacy — trade negotiations, investment agreements, and industrial capacity-building — was left hollow. The absence of a coherent trade policy meant that India neither joined the Regional Comprehensive Economic Partnership (RCEP) nor built alternative bilateral frameworks to cushion tariff shocks.
According to WTO data (2025), India’s share in global merchandise exports has stagnated around 1.8%, even as Vietnam, Indonesia, and Bangladesh surged ahead by integrating into regional value chains. The irony is striking: the self-styled “Vishwaguru” presides over an economy whose global trade integration remains weaker than many smaller Asian peers.
When Trump announced new tariffs on Indian goods in mid-2025, India’s foreign office could offer little more than rhetoric about “strategic dialogue.” The incident demonstrated that Modi’s diplomacy, premised on spectacle rather than substance, offers no insurance against economic coercion.
The Tariff Shock: Data and Impact
The immediate fallout of the tariff policy has been tangible:
- Steel and Aluminum: U.S. tariffs of 25% and 10% respectively reduced Indian exports by nearly 30% year-on-year (April–September 2025), according to DGFT data. Around 200,000 workers in secondary steel industries (particularly in Odisha and Jharkhand) faced layoffs or wage cuts.
- Textiles and Apparel: The U.S. raised duties on Indian synthetic fabrics and garments, citing “unfair subsidy regimes.” Exporters in Tiruppur and Surat report order declines of 20–25%, hitting mostly small and medium firms.
- Pharmaceuticals: Stricter U.S. FDA import rules, justified under the tariff regime, delayed shipments worth over $700 million in generics.
- IT Services: While not tariffed, tightening of H-1B visa norms and taxation rules under “America First 2.0” have strained India’s software exports, which grew only 3.2% in Q2 2025–26, the slowest in a decade.
Combined, these measures are estimated to have shaved 0.4–0.6% off India’s GDP growth in FY2025–26, a not-insignificant figure in an economy already slowed by consumer distress.
A Mirror to India’s Manufacturing Weakness
The tariffs’ impact would have been less severe if India had built a robust manufacturing base. But the “Make in India” campaign, launched with fanfare in 2014, has failed to deliver structural transformation.
Manufacturing’s share in GDP hovers around 16–17%, virtually unchanged from a decade ago.
Investment in manufacturing as a share of gross capital formation has fallen from 32% in 2011–12 to barely 26% in 2024–25 (CSO data).
What this means is that India has no internal resilience when global demand falters or tariffs bite.
Production remains import-dependent, supply chains are shallow, and productivity gains are unevenly distributed. Instead of industrial deepening, India’s growth story rests on speculative finance, consumption credit, and digital monopolies — a structure ill-equipped to weather trade shocks.
The Trump tariffs therefore reveal not merely an external challenge but an internal hollowness.
While Modi celebrates record stock indices, India’s industrial employment has fallen by nearly 6 million since 2018, according to CMIE estimates, and real wages in manufacturing have stagnated.
The mismatch between government triumphalism and the lived economy of workers and small producers has rarely been starker.
The Neoliberal Straightjacket
The Modi government’s economic philosophy — neoliberalism wrapped in nationalist rhetoric — compounds the problem. By privileging corporate monopolies and foreign capital, it has hollowed out the domestic productive base.
“Ease of doing business” in practice has meant ease for conglomerates: a regime of tax holidays, land concessions, and privatization of public assets. Meanwhile, micro, small, and medium enterprises (MSMEs), which employ over 110 million people, continue to suffer from credit scarcity, erratic demand, and policy shocks like demonetization and GST.
When the U.S. tariffs hit, these MSMEs had no buffer. The government’s response — announcing export credit lines and “market diversification funds” — is cosmetic.
No amount of export incentives can offset the absence of a coherent industrial strategy or trade diplomacy.
Unemployment, Inflation, and the People’s Economy
At the macro level, the government touts a 6 plus per cent GDP growth rate, but this figure masks widespread distress. Another fad of the regime is its constant boast that India will soon be the world’s third-largest economy—without a trace of shame in asking why, given its vast population, it is not already the largest.Unemployment stands at 8.4% (CMIE, September 2025), with youth unemployment exceeding 23%.
Rural inflation in food and fuel — exacerbated by global supply disruptions — has touched 8–9%, eroding household consumption.
Thus, the Trump tariffs aggravate an already fragile domestic situation.
Export contraction reduces industrial demand; declining remittances and job losses tighten rural incomes; and yet, public expenditure on social protection remains stagnant at below 2% of GDP.
The government’s rhetoric of “resilience” rings hollow when the daily realities of precarity, hunger, and indebtedness grow sharper.
A Foreign Policy without Economic Spine
The tariff shock underscores that foreign policy cannot be divorced from the economic foundations of sovereignty.
India’s diplomacy today is performative but powerless — celebrated abroad for optics, but domestically incapable of defending livelihoods. The “strategic autonomy” that New Delhi boasts of is in reality a dependence on U.S. markets and capital, offset only by episodic balancing gestures toward Russia or the Gulf.
This lopsided alignment reflects a deeper failure: India’s foreign policy ceased to be strategic the moment it became personalized. Modi’s foreign engagements are mediated not through institutional capacity or trade policy, but through spectacle — diaspora rallies, summit selfies, and the illusion of parity with great powers.
Yet, when policy friction arises — be it Trump’s tariffs or visa curbs — India finds itself bereft of leverage.
A Hollow Nationalism
The official response to the tariff crisis has been predictably defensive: appeals to self-reliance and “economic nationalism.” But this nationalism is hollow when the domestic economy remains tethered to external capital and consumption.
As tariffs shrink export margins and input costs rise, India’s manufacturing sector faces a dual crisis — global exclusion and domestic stagnation. In response, the state has leaned on symbolic politics — temple inaugurations, anti-foreign rhetoric, and cultural spectacles — to divert attention from economic pain.
This is not new. As history shows, when economic contradictions intensify, authoritarian nationalism becomes the political adhesive of last resort. Modi’s foreign policy failure, then, is not an isolated diplomatic lapse; it is a symptom of the broader fusion of neoliberal economics and majoritarian politics.
Conclusion: The Lesson of Dependence
The Trump tariffs have performed a diagnostic function.
They reveal an India that has celebrated its image abroad while neglecting its capacity at home — an India that mistook public relations for diplomacy and financial speculation for development. In effect, the idea of India has been conflated with Modi himself, and the entire foreign policy exercise has become a tool for his image management, calibrated to secure electoral dividends. The consequence is an economy exposed to external shocks and bereft of domestic buffers.
In the end, this crisis is not about Trump or tariffs alone. It is about the hollowness of a policy regime that confuses leader-centric spectacle for strategic depth.
Until India realises the follies of its power-obsessed narcissism, rebuilds its manufacturing base, reclaims policy autonomy, and restores the link between diplomacy and domestic strength, it will remain vulnerable to every tremor from Washington — or anywhere else.
