In 2025, Donald Trump and tariffs go together like fire and smoke. You can’t mention one without invoking the other. And in his latest “America First” tariff offensive, the spotlight is squarely on India. The big question: will New Delhi hold its ground, or blink first under pressure from the self-declared king of deals?

Even as India inches closer to a potential trade agreement with Washington, it remains in wait-and-watch mode, eyes glued to what kind of tariff thunder Trump might unleash come August 1. That’s when his long-delayed reciprocal tariffs from April are finally set to explode into effect.

The US President has already fired warning letters to over 150 countries, outlining the new tariff rates they will be slapped with if they want access to the American market. The numbers range between 10% and 15%, although Trump himself has hinted they could go even higher, he’s keeping the final call deliberately vague.

“We’ll have well over 150 countries that we’re just going to send a notice of payment out,” Trump declared this week. “The notice of payment is going to say what the tariff rate will be.”

In effect what it means –  Pay up, or lose access.

This bombshell comes hot on the heels of tariff blitzes already launched – 50% on Brazil, 19% on Vietnam, 25% on Canada, and 30% on the EU, not to mention steep levies on pharma and autos.

Trump is bulldozing and the world is scrambling. As the August 1 deadline barrels closer, trade partners are hustling to seal deals before they’re caught in the crossfire.

What About India?

Amidst the chaos, India might just have a sliver of breathing room. Recent reports Trump saying that a bilateral trade deal with India is “very close.” While the devil is still buried in the details, insiders hint that the two nations have wrapped up preliminary “mini-deals” and are now tackling the heavy-lifters.

“There will be an interim deal first – be it the first tranche or the second – before a full-blown BTA (Bilateral Trade Agreement),” an Indian official stated. “We’re doing our job. The rest is out of our hands.”

But here is where it also gets murky –  Trump also hinted the deal with India could mirror the one signed with Vietnam – which, by the way, comes with a 19% tariff across all imports. So while India may dodge the steepest blows, it won’t likely walk away untouched.

That said, even a lesser evil tariff rate could be a relief for sectors like pharmaceuticals and agriculture, which have been sweating bullets over the increasingly hostile US trade tone. A softer landing would give exporters the space to breathe, at least for now.

India Inc’s American Dream on Pause And the Clock’s Ticking
Still, India Inc is getting nervous, and for good reason. As the tariff tango between New Delhi and Washington drags on, Indian exporters are left holding their breath and their order books. From electronics to textiles, and seafood to gems, global clients are putting fresh orders on ice, waiting to see how Trump’s tariff roulette plays out.

Big names like Dixon Technologies, Bhagwati Products (Micromax), and Karbonn Group say they’re still shipping out, but new orders? Not so much. American clients are playing safe, adopting a classic “wait-and-watch” stance until the fog of tariff uncertainty lifts.

With bilateral trade at a whopping $131.84 billion in FY25, yes, it is undoubtedly tough!

Even long-lead orders (think Christmas sparkle and holiday bling) are hanging in limbo, especially in sectors like gems and jewellery. The ripple effect is being felt across boardrooms, warehouses, and factory floors.

Still, some glimmers of optimism remain.

According to CITI’s secretary general Chandrima Chatterjee, India has a decent shot at securing a better tariff deal than its key competitors. The short-term outlook –  Cautious optimism. The long-term play –  A strategic, below-the-radar hustle to undercut regional rivals like Indonesia and Vietnam.

Can India Score a Better Deal Than Jakarta?
New Delhi is in overdrive trying to ink a deal with Trump that’s sweeter than what Indonesia just swallowed, a 19% tariff, down from the originally threatened 32%. Trump’s message being – “Play nice, and we’ll let your exports through with fewer bruises.”

But India’s negotiating team wants more. Much more. They’re chasing a tariff rate lower than 20%, ideally under 10%, aiming to secure a competitive edge over other exporting nations in Asia. And so far, the vibes suggest Washington sees India differently, not as a transshipment hub like Vietnam, but as a standalone, strategic partner.

“We’re aiming for sub-10% tariffs, but the US will want serious concessions in return,” says Soumya Kanti Ghosh, chief economist at SBI and a key voice in the PM’s economic advisory setup.

What’s India Willing to Trade for a Trade Deal?
Let’s get real, for India, agriculture and dairy are off the table. But it’s open to bargaining chips in industrial sectors. In fact, New Delhi has floated an offer: zero tariffs on American industrial goods, if the US reciprocates.

Also on the table – more market access for select US farm products, and even a possible Boeing shopping spree.

Meanwhile, Trump has inked deals with Vietnam, the UK, and even struck a truce with China. Jakarta sweetened the pot with promises to buy $15 billion in American energy, $4.5 billion in agri-products, and (guess) 50 Boeing jets.

Threat First, Deal Later
According to Brian Tan, economist at Barclays Singapore, Trump’s game plan is transparent – send tariff shockwaves, get nations to the table, and then “negotiate” deals that look generous but only after scaring them stiff.

The preferred Trump tariff zone – 15%-20%, give or take a few headlines. Every tariff letter is a move on the chessboard—designed to provoke, push, and corner nations into concessions.

Even Malaysia is hedging its bets, waiting for the fine print on Indonesia’s deal before deciding its own next move. Their trade minister put it simply: “This has to be win-win.”

India, meanwhile, knows it may not walk away without a scratch. A 19% tariff like Indonesia’s may be the likely outcome unless New Delhi pulls a rabbit out of its diplomatic hat. Still, Indian negotiators are pushing for a tiered, interim approach, with “multiple deals” struck in phases.

And with Trump showing no signs of softening and India hosting the 2025 Quad Summit later this year it’s not just about tariffs anymore but also about geopolitical leverage.

Time to Worry… India’s $300 Billion Trade Deficit Warning Amid Export Gloom, Tariff Chaos, and ASEAN Tensions

Meanwhile, India’s goods trade deficit is forecast to balloon to a staggering $300 billion in FY26, up from $287 billion in FY25, as exports limp and imports roar. According to ICICI Bank Global Markets, the widening chasm is driven by feeble global demand, especially outside the US, even as domestic consumption refuses to hit the brakes.

Exports to the US may be propped up, for now, thanks to front-loaded shipments in anticipation of Trump’s August 1 tariff regime. But beyond America’s shores, it’s a wasteland. Exports to key geographies remain sluggish, stifled by weak demand, commodity swings, and intensifying trade fragmentation.

June data says it all – India’s overall goods deficit shrank to a 4-month low of $18.8 billion — not due to a global comeback but because of a narrower non-oil, non-gold deficit, which dropped to $7.8 billion from May’s $10.2 billion. But don’t let that lull fool you — the oil deficit held steady at $9.2 billion, and the YoY drop from $20.8 billion in June 2024 feels more like a pause than a pivot.

The outlook – bleak for exports, bullish for imports.

“So far, India’s goods exports are higher to the US due to front-loading of trade, but non-US exports have remained tepid. Thus, we see weak growth for India’s goods exports in the current fiscal year, but imports could be higher due to the relative strength of the domestic economy,” the report warns.

Essentially what it means –  India’s domestic economy is going strong — and sucking in imports across energy, capital goods, and electronics. But outbound trade – not keeping pace.

In June, exports dipped marginally (-0.1% YoY) to $35.1 billion. The culprit? A 16% YoY crash in oil exports. Meanwhile, electronics soared (+47%), and sectors like chemicals (+3.9%), plastics (+2.3%), agri (+1.6%), and engineering goods (+1.3%) showed some backbone — but not enough to offset broader weakness.

ASEAN, India’s Not-So-Friendly Neighborhood
As if tariff threats weren’t enough, India’s regional ties are also fraying especially with ASEAN. Trump’s tariff hammer and China’s manufacturing glut are pushing India and Southeast Asia into opposite corners.

Here is what is hurting India – the geopolitical twist – India suspects ASEAN is turning into China’s transshipment playground, rerouting underpriced goods to dodge tariffs. That’s not paranoia as it is already happening.

Vietnam has slapped anti-dumping duties on Chinese steel.

Indonesia is blocking Chinese e-commerce players like Temu.

The US-Vietnam trade pact includes a clause that transshipped goods could face double tariffs.

India’s commerce minister recently stoked controversy by calling ASEAN “China’s B-team.” Undiplomatic – sure. Unjustified – maybe not.

New Delhi’s been trying to revamp its free-trade agreement with ASEAN for years,  focusing especially on rules of origin to stop backdoor Chinese entry. But ASEAN has been dragging its feet. Worse, the bloc moved swiftly to expand its FTA with China, a process it began only in November 2022 and wrapped up in record time. That move raised eyebrows and blood pressure in South Block.

The result – Distrust.

India increasingly feels that tariff-free trade with ASEAN equals a free pass to China. That’s dangerous not just for India, but for global trade itself. If regional blocks emerge, US-led vs China-centric, India could get caught in a very expensive squeeze.

As Trump re-engineers trade into a battlefield, and China floods the world with excess inventory, trust is in short supply. Tariff arbitrage — once niche — could become the new global hustle. And unless ASEAN steps up to prove where its loyalties lie, India might start building higher walls around its own markets.

The Last Bit: The Game Is On

Trump’s tariff blitzkrieg is no longer a threat but a scheduled reality. Come August 1, the global trade board resets, and every country, India included, gets a new price tag for access to the world’s most lucrative consumer market. The old rules are dead. Deals now come after the pain, not before. Welcome to the new age of economic blackmail.

For India, this is a moment of truth. The world’s fastest-growing major economy now finds itself cornered not by economic weakness, but by geopolitical chess. With a ballooning $300 billion trade deficit, a jittery export engine, ASEAN hostility, and an incoming Trump-shaped tariff tsunami, the choices aren’t just about trade anymore. They’re about leverage, optics, and strategic positioning in a world tearing itself into blocs.

Yes, India may secure a better deal than Vietnam or Indonesia. It may score sub-10% tariff rates and buy itself breathing space. But that comes at a price, Boeing planes, energy deals, agri-access and potentially, diplomatic compromises that ripple far beyond trade.

This is no longer a bilateral negotiation but a global audition and India is on stage, script in hand, with the world watching.

The question isn’t whether India can outmaneuver Trump but the real question is: can it do so without selling the farm?

In a world of transactional diplomacy, India must walk the tightrope between being a trusted partner and a self-reliant power. Because the next few weeks won’t just define the future of Indo-US trade they may redraw the map of India’s economic alliances….Tick, tock.