Trump’s tariffs on India: The 21-day deadline to impose a 25% additional tariff on Indian exports to the US ends on Wednesday. In a draft notice published on Monday, August 25, the US administration detailed its plan to impose a 50% tariff on Indian products as the August 27 deadline approaches, signalling its intent to move forward with the levies as the Russia-Ukraine war continues. The Department of Homeland Security has already issued notice saying the increased levies would hit Indian products “that are entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 AM eastern daylight time on August 27, 2025”.
One may wonder here if Trump’s tariffs hit India only, or if they may backfire. According to experts, US President Donald Trump’s action on India to punish Russia is like an ‘action without vision’. They said that a 50% tariff on Indian exports to the US would hit the health industry very severely, as India is one of the biggest generic drug suppliers to the US.
Against the backdrop of the higher tariff threat, Indian pharma players are reportedly shifting their generic drug supply to Australia, leaving the US market at the mercy of Trump’s ‘MAGA’. Moreover, the Indian government is exploring options to import crude oil without hurting its foreign reserves, thereby challenging the petrodollar dominance in global trade.
Due to the dominance of oil trade in the US dollar, the foreign reserves of oil-importing countries such as India and China are taking a hit. So, any chances of payments in the local currency or any barter like oil for food or oil for medicines are something that the government is looking at.
These steps are expected to pare the losses that the Indian economy would be incurring due to Trump’s tariffs. However, one more development may irk the US administration — rising India-China bonhomie.
The foundation of the India-China relationship has been shaky for the last 60 years, since 1962. However, in the wake of Trump’s tariffs and emerging trade war fears, the recent statement by the authorities from both sides has been affirmative, with a clear sign of rapprochement. They said that Donald Trump’s tariff dictate has brought India-China-Russia closer, and it won’t be a surprise if India joins China’s Belt and Road Initiative (BRI), to give the US a Dutch therapy by penalising Pakistan, a medicine that Trump tried with Vladimir Putin by imposing tariffs on India. They said the Indian Prime Minister must integrate his ambitious Act East policy with China’s BRI.
How can Modi plug in the Act East policy with China’s BRI?
Why would Modi want to integrate the Act East policy with China’s Belt and Road Initiative? Manish Bhandari, CIIA & Founder of Vallum Capital, said, “Today, India faces a strategic transport bottleneck that costs billions annually. The traditional Suez Canal route takes 45-60 days and covers 8,700 nautical miles to reach Russian and Central Asian markets. The China-Pakistan Economic Corridor (CPEC), though shorter at 3,000 km, remains blocked for India due to sovereignty concerns over Pakistan-occupied Kashmir. These limitations force India to rely on expensive, time-consuming routes that reduce competitiveness.”
Bhandari said that India started its work on the International North-South Transport Corridor (INSTC), which emerges as India’s game-changing alternative — a 7,200 km multimodal network that slashes transit time to 25-30 days and reduces costs by 30% compared to traditional routes. However, a friction remains on its way.
“Plugging in China’s Belt and Road Initiative (BRI) and India’s “Act East” policy can be aligned to create transnational corridors linking Chinese manufacturing hubs with Indian ports and markets. Participating in joint railroad and port projects reduces logistics costs for Chinese exports into South Asia and beyond,” Bhandari pointed out.
“Collaboration on renewable-energy infrastructure (solar parks, wind farms) helps China export equipment while improving India’s energy mix and grid stability. Today, Russian oil now forms 36% of India’s crude imports ($67.2B, up from <2%), powering $84.96 billion in petroleum exports (12.59% global share). Direct access to Kazakhstan (43% of global uranium output) and Uzbekistan supports India’s goal to triple nuclear capacity by 2032, while Turkmenistan’s 13.6 TCM gas reserves offer long-term pipeline potential. This energy-security triangle with Russia and Central Asia reduces dependency on volatile Middle Eastern suppliers,” he noted.
Central Asia represents a largely untapped market for Indian goods and services. The region’s combined GDP exceeds $300 billion, with significant demand for Indian pharmaceuticals, textiles, agricultural products, and technology services. However, while strategically important, current trade routes through Iran’s Chabahar Port remain limited in capacity and efficiency, compared to potential BRI corridors, experts say.
Act East integration with BRI: Top benefits
Manish Bhandari of Vallum Capital said that India’s participation in the Belt and Road Initiative could enhance its competitive position by:
1] Reducing logistics costs by 20-30%;
2] Improving manufacturing competitiveness through better infrastructure;
3] Expanding market access to 140+ countries in the BRI network; and
4] Leveraging India’s strengths in services and technology.
Dent on petrodollar dominance
On how India’s joining BRI would be a befitting reply to Trump’s tariffs on India and China, Sandeep Pandey, Co-founder of Basav Capital, said, “Plugging in the Act East Policy with China’s BRI would give both countries access to the Middle East countries, which are home to most OPEC members. Chances of barter trade are high with the Middle East countries, as India recently executed an oil-for-food trade with Iran by supplying food grains for the receipt of crude oil. Similarly, the Indian government is working on oil for medicines. This will not only enable India and the oil-producing countries to come out of the US dollar-dominated global trade system and enhance their dollar reserves.”
Are Trump’s tariffs hurting US too?
On whether Trump’s tariffs are a challenge for the US government too, Sandeep Pandey of Basav Capital said, “By imposing heavy tariffs on India, US President Donald Trump has jeopardised the American Medicare. India is one of the biggest suppliers of generic drugs in America. Now, due to the heavy Trump tariffs, India has diverted its exports from the US to Australia. So, in terms of pharma and Medicare, Trump’s tariffs are more painful for the US than India.”
Why would Beijing allow New Delhi’s entry into BRI?
Why would Beijing allow New Delhi to plug in the Act East policy with BRI? Gaurav Goel, Founder & Director at Fynocrat Technologies, said, “Rising tariffs from the United States under President Trump and new trade barriers in Europe are squeezing China’s exports. Many companies have also shifted supply chains to India, Vietnam, and other countries, weakening China’s traditional manufacturing advantage. Additionally, Beijing’s support for Russia has strained ties with Europe, raising the risk of sanctions. At the same time, US tariffs remain a constant pressure point.”
Gaurab Goel of Fynocrat Technologies said China will likely face slower growth and growing external risks. The real question is whether Beijing can adapt its strategy and move toward a more balanced, consumption-led economy. So, India’s joining BRI is expected to bail out China from the precarious condition caused by Trump’s tariffs.
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