Trump’s new tariff war with India is backfiring: it accelerates New Delhi’s pivot toward BRICS, ASEAN, and non-Western partners and reshapes global trade dynamics.
The escalation marks the sharpest deterioration in U.S.-India trade relations in two decades. Prime Minister Narendra Modi has denounced the measures as “unfair and unjustified,” noting that other major buyers of Russian crude have not been penalised. “We will protect our farmers and our domestic interests, even if we must pay a heavy price,” he told a rally in Gujarat.
Within days, India announced a pause on planned U.S. defense acquisitions—a not-so-subtle signal that its strategic options extend far beyond the Pentagon’s procurement lists. Senior officials have begun mapping out a menu of countermoves, from limited retaliatory tariffs to deeper integration with BRICS partners and other non-Western economies.
The Changing Chessboard
To understand why India is in no rush to fold, it is worth taking stock of how the balance of power has shifted.
First, BRICS itself has shaped into a $32.5 trillion economic coalition after the addition of Egypt, Ethiopia, Iran, Saudi Arabia, the UAE, and Indonesia. The enlarged group now represents roughly 30–40 percent of global GDP and handles over a fifth of world trade. This is not yet a substitute for the G7 ($46.8trn), but it is a credible alternative pole.
Second, while the U.S. dollar remains dominant, accounting for around 58 percent of global reserves and cross-border transactions, it is increasingly being eroded, as in 2000 it was 72%. India’s trade with Russia, which surged to around $65–69 billion last fiscal year, is increasingly settled in rupees and roubles, bypassing the dollar entirely. Similar currency-swap arrangements with the UAE and other partners are quietly expanding.
Third, India’s role in critical global supply chains gives it built-in leverage. The country produces about 60 percent of the world’s generic medicines and exported $28 billion worth of pharmaceuticals in 2023–24. Its IT and ICT services exports, worth roughly $150 billion annually, are heavily embedded in U.S. corporate operations, from Silicon Valley’s software pipelines to Wall Street’s back-office systems. Tariffs on Indian goods thus risk boomeranging onto American companies and consumers.
The Power of “Optionality”
Modi’s real advantage lies in what analysts such as Nishant Rajeev call “multi-alignment” or “optionality,” the skill of pivoting among multiple partners and platforms without locking into any single one. India’s External Affairs Minister, S. Jaishankar, framed this strategic agility in Foreign Policy as the freedom to choose partners based on interests rather than on emotion or prejudice.
India’s $3.4 trillion economy and 1.4 billion market give it scale; its BRICS membership, combined with Quad, the Shanghai Cooperation Organisation (SCO), and G20 roles, gives it reach. This unique positioning allows New Delhi to keep one foot in the Western security architecture while cultivating deep ties to Russia, Iran, the Gulf, and Central Asia.
Optionality has a financial dimension too: the more India settles trade in local currencies, the less exposed it is to U.S. financial leverage. That, in turn, blunts the coercive edge of both sanctions and tariffs.
Why Tariffs May Backfire
Washington’s wager appears to be that punitive tariffs will force India into strategic compliance. History suggests otherwise. Sustained tariff wars often prompt global supply chains to reroute, and the early signs here point to a similar outcome.
Rather than isolating India, higher tariffs may accelerate the very multipolarity the U.S. seeks to contain. Trade diversion toward BRICS partners, the Gulf, and ASEAN could deepen alternative payment systems and standards. Politically, the optics of coercion from Washington may play into Modi’s domestic narrative of sovereign resilience, especially in the run-up to state elections.
There are domestic costs for the U.S. as well. More expensive Indian pharmaceuticals could raise healthcare costs, while disruption in IT services risks operational headaches for U.S. firms. In a tight labour market for STEM talent, alienating a country that produces over half a million new engineering graduates each year is a questionable move.
A Strategic Miscalculation?
Seen through this lens, Trump’s tariff escalation risks becoming a strategic own goal. It undermines the bipartisan effort of the past two decades to position India as a counterbalance to China. It also introduces uncertainty into defence cooperation, just as Washington is seeking to strengthen maritime deterrence in the Indo-Pacific via essentially the Quad.
More fundamentally, it sends a message that U.S. economic statecraft is increasingly zero-sum, a framing that will nudge other swing states toward hedging strategies. In that world, India will not stand alone: it will be joined by BRICS and several mid-sized powers seeking insulation from great-power coercion.
The Smarter Play
If Trump’s goal was to keep India close, a more sophisticated approach would blend incentives with calibrated pressure. That could mean reviving stalled trade talks, offering targeted supply-chain co-investment in sectors like semiconductors and AI, and easing market-access irritants in agriculture and services.
Such engagement would not preclude firm conversations about Russia, but it would avoid the trap of punitive measures that push India further into the BRICS and alternative coalitions.
Modi’s India will not back down from a challenge; it will build around it. The more the West applies pressure, the more New Delhi is likely to deepen its ties with BRICS, ASEAN, and other non-Western coalitions that offer strategic autonomy in a multipolar world.
Finally, wishing Modi is aware, the Quad in an ‘America First’ world aimed at encircling China in the Indo-Pacific, as put by Aparna Pande in The Diplomat. Fully within the BRICS, India is stronger. After all, Trump’s war is primarily against the BRICS.
Ricardo Martins, PhD in Sociology, specializing in International Relations and Geopolitics
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