In the face of a 26% tariff hike imposed by US President Donald Trump on Indian exports, New Delhi is choosing diplomacy over retaliation. According to a senior Indian government official, the country is prioritizing dialogue and negotiation in an effort to secure a balanced and mutually beneficial bilateral trade deal with the United States.
Rather than escalating tensions, the South Asian nation is charting a strategic path—leveraging what the official called a “first mover advantage” in trade talks over regional competitors like Vietnam and Cambodia. The official, speaking on condition of anonymity, stated, “We are focused on resolution, not reaction. India wants engagement, not escalation.”
A Calculated Trade Strategy
The newly imposed tariffs by the Trump administration have added pressure to India’s already strained export economy, but the government remains measured in its response. By refraining from tit-for-tat tariffs, India aims to preserve diplomatic goodwill and secure a long-term trade agreement that could reduce duties on both goods and services.
“All options are on the table,” the official noted. “We are open to comprehensive negotiations across sectors. Our primary goal is to ensure a fair and equitable deal that reflects both countries’ strategic interests.”
The Ministry of Commerce and Industry has reportedly intensified efforts to secure the deal by expanding its NAFTA division—the office that oversees trade relations with the United States, Canada, and Mexico. New officers are being appointed, and senior officials close to retirement may see their terms extended to maintain continuity during this critical period.
Modi and Trump Align on Trade Talks
The groundwork for a deal was laid during Prime Minister Narendra Modi’s recent visit to Washington, where both leaders committed to finalizing a bilateral agreement by the fall. While Trump’s unexpected tariff announcement came as a blow, it hasn’t derailed the dialogue.
India’s restraint stands in stark contrast to China’s reaction—Beijing swiftly slapped a retaliatory 34% tariff on US imports. But in New Delhi, the mood remains pragmatic. “Retaliation is not the only form of strength,” the official said. “Patience can be a more powerful lever in complex negotiations.”
A Race Against Rivals
India’s move to hold back retaliatory measures comes amid a regional race to secure favorable trade terms with the US. Vietnam and Cambodia—also hit by steep tariffs—are moving quickly to negotiate exemptions.
Vietnam, facing a hefty 46% duty on exports to the US, has requested a 45-day delay to finalize a potential agreement that could see its tariffs drop to zero. Cambodian Prime Minister Hun Manet, meanwhile, is pursuing immediate tariff reductions on 19 product categories—from 35% to 5%—in a bid to remain competitive.
Trump confirmed ongoing discussions in a social media post, stating: “Just had a very productive call with To Lam, General Secretary of the Communist Party of Vietnam, who told me that Vietnam wants to cut their tariffs down to ZERO if they are able to make an agreement with the US.”
With regional players fast-tracking negotiations, India knows the clock is ticking.
A Critical Juncture for Indian Trade
Despite being the world’s fifth-largest economy, India has yet to finalize a full-fledged trade agreement with any Western power—largely due to contentious issues around labor rights, environmental standards, and digital data governance.
Talks with the European Union and the United Kingdom have hit repeated roadblocks, leaving the US deal as the most viable immediate pathway to bolster exports and stimulate economic momentum.
Economists warn that failure to secure an agreement could see India lose ground to more agile competitors. Yet, the measured response from New Delhi signals a deep strategic calculus: avoiding a trade war now could yield broader gains in the months ahead.
Markets React Moderately
Despite the tariff announcement, Indian markets have remained relatively stable. The NSE Nifty 50 Index outperformed most Asian benchmarks last week, with investors betting that the impact of the levies would be less severe for India than for other regional economies.
Still, exporters are on edge. The government has said it is in active communication with affected industries and stands ready to provide assistance if needed.
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