New Delhi: Donald Trump’s 50% tariffs on Indian goods have triggered an unusually sharp response from Raghuram Rajan, the former Reserve Bank of India governor. Rajan minced no words: this is a “wake-up call” for New Delhi and proof that the India-US relationship has “clearly broken down.”
For India, the message is blunt. Don’t put all your eggs in the American basket. Diversify, reform, and stop believing political optics will save trade deals.
Rajan: Stop Being Overdependent
Rajan reminded policymakers that the US is just one partner in a multipolar world. “Let us not become dependent on any single country to a large extent. Let us look east, to Europe, to Africa, and continue with the US, but unleash reforms that will help us achieve the 8–8.5% growth needed to employ our youth,” he said.
That number, 8% growth, is not casual. India needs it just to keep up with the millions of young people entering the job market every year. Tariffs that slash exports, therefore, hit not just companies but India’s employment prospects.
Power Play, Not Fairness
Rajan was blunt about Trump’s strategy. Forget fairness, forget rules. “I think we are beyond issues of fairness, sovereignty, etc. We are talking about a situation where it is a power play,” he said.
Tariffs, in Trump’s hands, aren’t just about trade. They’re about muscle. “It can be a way for the US to essentially use force when it doesn’t want to use its military,” Rajan warned.
That’s not theory. Trump himself has long believed trade deficits mean America is being “cheated.” In his worldview, tariffs punish freeloaders and fill US coffers. Rajan noted that tariffs are a “cheap way of getting revenues” after Trump’s sweeping tax cuts, outsiders pay, while US consumers are told they aren’t really taxed.
This isn’t new. In the 1980s, Japan was Trump’s punching bag. Now it seems to be India.
India Targeted Harder Than Others
The sting is sharper because India was treated worse than others. Rajan pointed out that while other Asian countries were bracketed at lower tariff levels, India got stuck with a 25% base tariff, and then an additional 25% slapped on top. “The fact that the Indian tariffs have been set at 25, the base tariffs, even while other countries are much lower in Asia, makes India disadvantaged. So the relationship clearly has broken down,” Rajan said.
Turkey, China, and even the European Union, all of whom still buy Russian energy, didn’t face the same hammer. India alone was singled out. I think there are no true questions about that.
Oil Discounts Vs Export Losses
One big American complaint is India’s purchase of discounted Russian oil. Trump has used it as a convenient stick. Rajan’s view? The math may not even add up.
“We need to ask who benefits and who is hurt. Refiners are making excess profits, but exporters are paying the price through tariffs. If the benefit is not large, perhaps it is worth considering whether we should continue these purchases,” he suggested.
Translation: if refiners’ margins come at the cost of exporters losing markets, India must rethink.
Washington Doubles Down
If Rajan was blunt, White House officials were no softer. Kevin Hassett, director of the US National Economic Council, openly accused India of “intransigence” in trade talks. “If the Indians don’t budge, I don’t think President Trump will,” he stated.
For the US, tariffs are both a punishment for Russian oil and a bargaining chip to force open Indian markets. Agriculture is a particular sticking point: America’s heavily subsidised farmers want in, but India has drawn a red line. “There will be no going back on our red lines,” stated EAM Dr. Subrahmanyam Jaishankar recently.
Treasury Secretary Scott Bessent added another angle: tariffs were also a protest against the “slow pace” of a trade deal. In other words, tariffs are now a blunt pressure tactic.
India’s Counter And Eastward Pivot
India isn’t folding. Prime Minister Narendra Modi is preparing an eastward tour to Japan and China for a Shanghai Cooperation Organisation summit. The signal is clear: if Washington wants to play tough, India has other options.
Rajan too echoed this diversification. His advice: deepen ties with Europe, Africa, and Asia. Don’t wait for Washington’s mood swings.
Analysts: Tariffs Sting, But India Still Grows
The tariffs will hurt some exporters, but analysts aren’t predicting a collapse. BMI, a Fitch Solutions firm, projected that India’s GDP will still hover above 6% through the decade, even if tariffs drag. GST reforms, they argued, could offset much of the pain.
“We forecast India’s economic growth to steadily slow to just above 6.0 per cent by the decade’s end… yet still positioning India among Asia’s fastest-growing economies,” BMI said.
SBI Research estimated that GST changes and income tax cuts could boost consumption by over ₹5.3 lakh crore, around 1.6% of GDP. Fitch Ratings also kept India at a stable ‘BBB’, saying tariff impact would be limited.
In short, Trump’s tariffs are a headache, but not a death blow.
Beyond Trade: The Strategic Lesson
For India, Rajan’s message is clear: stop banking on sentimental diplomacy. Trump’s tariffs show the limits of “friendship” in international politics. Interests win, not hugs.
The US has turned tariffs into a weapon. Rajan calls it what it is: a power play. For India, that means pushing domestic reforms, diversifying export markets, and ensuring youth employment isn’t hostage to Washington’s tantrums.
Crying foul? Accept that power respects power, and double down on reforms and new alliances! Diversify. We’re not some sidekick in America’s script. We’re a billion-strong market with global clout. If Washington plays tough, we must play tougher. That’s how India should walk.
Also Read: 50% Trump Tariff Slams India Exports, Risks Jobs?
