In contrast to China's strong reaction to Trump's protectionist tariffs, India has chosen a path of diplomatic engagement. Despite significant market impacts, the Indian government is actively negotiating a comprehensive bilateral trade agreement with the US (US-India Compact), initiated even before the recent tariff announcements. This strategy aims to mitigate the negative effects of the tariffs and potentially benefit from them by stimulating domestic production.
Discussions with the US are underway to address the trade imbalance and finalize the US-India Compact, which was initially discussed during Modi's visit to the White House. Simultaneously, India is in talks with the EU, which is pushing for zero tariffs on auto imports. While the Indian government considers gradually reducing tariffs, the domestic industry opposes this, advocating for a minimum 30% tariff and maintaining current rates on electric vehicle imports for another four years.
India's approach seeks to attract foreign investment, as delocalization to India might become more appealing than competing nations with higher tariffs. The strategy underscores India's ambition to navigate global trade tensions strategically, prioritizing diplomatic solutions and potentially utilizing the situation to foster domestic economic advancement.