India holds firm amid rising trade tensions with U.S.

While neighboring Asian nations scramble to strike trade agreements with Washington, India has adopted a notably different strategy. New Delhi is taking its time negotiating with the United States despite facing tariffs as high as 50% on its exports, confident that a resilient domestic economy and less severe trade impacts than anticipated give it leverage to secure better terms.

The approach reflects a calculated gamble by Indian officials who believe their strong bargaining position allows them to wait out the pressure. Recent export data appears to support their assessment. Indian shipments to the United States fell 8.6% in October compared to the same month last year, reaching $6.3 billion. That marked the second month since the 50% tariff took effect, but the decline was actually smaller than the 12% drop recorded in September.

India confident despite trade headwinds

The more modest impact has emboldened negotiators in New Delhi, according to senior government officials familiar with the discussions. While certain sectors like textiles have experienced declining American orders, the broader economic damage from the tariffs has remained contained. That limited fallout is giving trade representatives breathing room to pursue a more advantageous agreement rather than accepting whatever terms Washington initially offers.

Government sources indicate they expect the United States to eventually roll back a 25% tariff linked to Indian purchases of Russian oil. They anticipate the overall rate could settle around 15%, with India prepared to reduce its own import duties on more than 80% of goods while maintaining protections for sensitive areas like agriculture. One official involved in the talks said India is prepared to wait as long as necessary to reach acceptable terms.

President Donald Trump suggested last week that Washington was nearing a deal with India that would strengthen both economic and security cooperation between the two nations. However, Indian officials have maintained publicly that they will not rush into any agreement, a stance that stands in stark contrast to countries like Japan and South Korea that have already finalized tariff reductions with the Trump administration.

Exporters adapt while government provides support

The Indian government has moved aggressively to help companies weather the trade tensions through multiple channels. Recent trade agreements with the United Kingdom, United Arab Emirates and Australia are opening new markets for exporters seeking to reduce their dependence on American buyers. New Delhi has also implemented tax cuts on raw materials and allocated a $5.1 billion support package designed to bolster exporters facing headwinds.

Many Indian companies have managed to cushion the blow by pursuing customers in African and European markets while retaining American clients through discounts and flexible delivery schedules. Apparel and footwear manufacturers are absorbing cost increases of up to 20% to maintain relationships with U.S. buyers, according to export industry leaders.

The government and central bank have provided targeted relief measures including short-term loan moratoriums for affected businesses, though they have avoided broad fiscal stimulus programs. Domestic tax cuts on hundreds of consumer products implemented since September are strengthening local demand and helping exporters remain competitive despite the tariff burden.

Tax reductions on inputs like synthetic fibers have particularly aided textile exporters, who are offering discounts between 10% and 20% on garments depending on style and order size. The adjustments appear to be working. India’s economy expanded at an annual rate of 7% during the July through September quarter, and the central bank projects growth of 6.8% for the full financial year.

Chinese competition emerges as bigger threat

While India has managed the American tariffs better than expected, exporters warn that intensifying competition from China poses a more serious challenge. Excess manufacturing capacity in China is flooding global markets with low-priced goods that undercut Indian products across multiple sectors.

Chinese companies have established strong positions in key markets and their domestic economic pressures have made them fiercely competitive on price. Indian goods exports to markets outside the United States actually fell 12.5% in October compared to the previous year, a steeper decline than shipments to America. The drop was driven by weaker sales of engineering products, petroleum and jewelry.

Analysts suggest the pattern may reflect heightened competition in alternative markets as various countries redirect exports following the U.S. tariff announcements, creating a more crowded and challenging environment for Indian exporters seeking to diversify away from American buyers.