India blazes trail for South Africa amid Trump tariffs

As affected countries struggle under the weight of US President Donald Trump’s erratic tariff policy, India presents an interesting case study of a nation standing up to the recent bully-boy tactics of the world’s most powerful economy.

While many countries are grovelling at his feet, trying to appease Trump by stroking his massive ego, some offering jets, others nominating him for the Nobel Peace Prize, India is trying to carve a new path of less dependency on the US.

Without being belligerent and while continuing to negotiate for a better tariff deal, New Delhi has drawn a red line, with its commerce minister, Piyush Goyal, declaring that his country “will neither bow down nor appear weak” in its relationship with other countries.

The stakes are high, as the US has been India’s largest trading partner and the country is likely to suffer an estimated loss of around 0.8% of its GDP due to prolonged 50% tariffs.

Trump, who sees the relationship as biased in favour of India and believes it has a lot to lose if it doesn’t tow the line, wrote on Truth Special: “What few people understand is that we do very little business with India, but they do a tremendous amount of business with us.

They sell us massive amounts of goods, their biggest ‘client’, but we sell them very little.” Undoubtedly, the high tariffs will hurt the world’s fifth-largest and fastest-growing economy.

Among the sectors most heavily impacted by the tariffs are labour-intensive industries, such as textiles, footwear, jewellery and gems, which produce goods at a low cost but may be priced out by the massive US tariffs.

This will give India’s competitors in Bangladesh, Sri Lanka, Vietnam and South Korea, which have to contend with just 15-20% tariffs, the competitive edge.

India’s response is interesting and worth consideration by countries like South Africa, looking to become self-reliant and less dependent on the US for economic growth.

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It’s adopting a two-pronged strategy which, if successful, could provide a blueprint for a new multipolar world order where the financial dominance of the US will be diluted.

The first part of the strategy revolves around the domestic economy.

It involves stimulating local economic growth through sweeping tax cuts and reforms to promote foreign investment and encourage domestic consumption to cushion the tariff blow.

Prime Minister Narendra Modi is promoting the “Made in India” mantra, urging consumers to buy domestically produced goods.

“We should become self-reliant – not out of desperation, but out of pride. Economic selfishness is on the rise globally, and we mustn’t sit and cry about our difficulties; we must rise above and not allow others to hold us in their clutches,” he said.

The second leg of India’s strategy centres on broadening India’s trade base through diversification of its markets, finding new trade partners and engaging in multilateral partnerships and cooperation through Brics and other platforms where countries, including South Africa, are seeking to reduce their dependence on the US.

The quest for new trade relationships is already bearing fruit, as evident from the recent India-Japan agreement to expand cooperation in the energy and human resources sectors after Modi and his Japanese counterpart, Shigeru Ishiba, held talks in Tokyo.

They agreed to boost Japanese private sector investment in India to 10 trillion yen (about R1.1 trillion) over the next decade.

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A key focus of the agreement is on Japan helping India overcome challenges in building a semiconductor ecosystem and reducing its heavy dependence on imports.

Japan has agreed to help New Delhi build its semiconductor industry, which will be a boost for Indian exports, as there is worldwide demand for semiconductors.

India has been a key ally of the US and the West, despite New Delhi’s cordial relations with Russia and its participation in forums such as Brics, whose members are keen to reduce economic dependence on Washington.

Trump’s tariffs are pushing India to seek new allies, including China, a key economic rival of the US, and the main focus of the American president’s trade war.

Modi’s participation in the Shanghai Cooperation Organisation (SCO) summit in Tianjin opened the door for India and China to set aside their rivalry, with the two neighbouring countries pledging cooperation.

The leaders of the world’s two most populous nations – representing some 2.8 billion people – also agreed to try to resolve their long-running border dispute.

The SCO event, attended by more than 20 leaders of non-Western countries, where Modi, Chinese President Xi Jinping and Russia’s Vladimir Putin were seen together, must have irked Trump, whose trade war to pressure countries to do his bidding seems to have pushed India into seeking an alliance with China and Russia instead.

The question is: will India be able to continue its positive economic trajectory through its strategic domestic and foreign interventions to bypass the impact of Trump’s tariffs?

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