President Donald Trump on Wednesday announced sweeping new tariffs on nearly all U.S. trading partners, including a 34% tax on Chinese imports, a 27% reciprocal tariff on India, and 20% on the European Union. These measures threaten global economic stability and could trigger widespread trade wars. While Trump argues these tariffs will boost domestic manufacturing and bring factory jobs back to the U.S., they risk causing sharp price hikes, disrupting economic alliances, and slowing growth.

A major concern for India is how these tariffs will impact its economy. Unfortunately, opposition leaders, rather than conducting thorough analysis, reacted with rhetoric. Criticism of Prime Minister Modi aside, the key question remains: what should India do now? Opposition leader Rahul Gandhi pointed out risks to Indian agriculture, the automobile sector, and pharma industries, but failed to push for a detailed parliamentary debate before adjournment.

India faces a 27% tariff, placing it in the lower half of affected countries. This, however, could present opportunities, particularly as China faces much steeper duties of up to 65%. Sectors like engineering goods, electronics, textiles, gems, and jewelry could see new openings as global supply chains shift. However, industries such as agriculture, steel, and automobile components may struggle to absorb higher costs, impacting overall export competitiveness.

One silver lining is that Indian pharmaceutical products have been exempted from U.S. tariffs. This led to a surge in Indian pharma stocks, with the sector seeing its biggest intra-day gain in over four years. The U.S. is a crucial market for Indian pharmaceuticals, accounting for nearly $9 billion in exports last year—about one-third of India’s total pharma exports. Analysts see this exemption as a temporary relief but caution that future tariffs remain a possibility. If the U.S. were to impose new restrictions, it could severely impact the sector’s long-term growth.

The increased tariffs could, however, erode the competitiveness of other Indian exports in the U.S. market, leading to lower sales and revenue losses. Indian exporters will need to either absorb the additional costs or pass them on to consumers, potentially impacting demand. The automobile sector, particularly auto parts exporters, also faces challenges, but industry leaders believe the overall impact will be manageable since competitors from other nations face similar challenges. Nevertheless, smaller businesses in these sectors may find it harder to cope with the increased costs, leading to potential job losses.

Economists estimate that the tariff hikes could reduce India’s GDP growth by approximately 0.6 percentage points. While this projection suggests a moderate slowdown, it does not indicate an economic crisis. India’s trade resilience will depend on how effectively it navigates the shifting global trade landscape.

To mitigate risks and make the tariff hike a mixed bag, India must diversify its trade portfolio by reducing dependence on the U.S. market and expanding into other regions. Investment in technology, innovation, and infrastructure can enhance the global competitiveness of Indian products, making them less vulnerable to tariff-induced price hikes. Strengthening trade partnerships with emerging economies and reinforcing regional trade agreements can also serve as buffers against U.S. tariffs.

Diplomatic negotiations will be crucial in securing favorable trade agreements and reducing tariff barriers. Additionally, India can explore lowering import tariffs on select goods to improve trade relations and offset the impact of U.S. measures. Policymakers must also support domestic industries through incentives and subsidies to help businesses adjust to the new trade environment.

While Trump’s tariffs pose challenges, they also present opportunities. Strategic policy decisions, targeted reforms, and proactive economic measures will determine whether India emerges stronger or suffers setbacks in the evolving global trade landscape.