Tariffs, trade and strategic autonomy: India must keep its options open

Bivash Modi

(modi.bivash@yahoo.in)

The latest American sanctions law has opened another difficult chapter in India–US economic relations. The Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, signed into law by President Donald Trump on September 18, empowers the US administration to impose tariffs of up to 100 per cent on goods from countries that fall within specified categories of major purchasers of Russian crude oil and natural gas, or countries facilitating sanctions evasion. The tariffs are not automatic; the President has discretion over whether and at what level to impose them.

The law had earlier passed the US Senate by 86-11 and the House by 262-159. India and China are particularly exposed because of their substantial purchases of Russian crude. The legislation, however, does not simply name India and China. It uses criteria based on major importers, while also providing exemptions and waivers.

This distinction matters. The power to impose a tariff is not the same thing as the decision to impose it. In other words, Washington has acquired a larger negotiating instrument, but the actual tariff remains a policy choice.

The question of double standards

The legislation has nevertheless raised questions about consistency. It contains a provision exempting US purchases of Russian uranium for nuclear reactors and medical-isotope requirements. It also provides an exemption for countries whose Russian natural-gas imports remain below a specified threshold and which are taking significant steps to reduce dependence.

The European Union has historically been a major purchaser of Russian natural gas, although it has substantially reduced its dependence and has set a timetable to phase out remaining Russian pipeline gas and LNG imports.

Thus, the Indian question is simple: if national interest is a legitimate consideration for Washington, why should the same principle not be legitimate for New Delhi? India is not asking for immunity from international consequences. It is asking that strategic choices be assessed consistently.

Trade cannot be a one-way street

India must recognise another uncomfortable reality. However large an economy becomes, it cannot afford to disengage from a market as large and affluent as the United States. American consumers, companies and technology ecosystems remain important to Indian exporters.

That is why India should neither slam the door on Washington nor surrender its negotiating space. The answer lies in diversification.

New Free Trade Agreements should be pursued aggressively with Europe, the United Kingdom, the Gulf economies, ASEAN, Africa and Latin America. The objective should be simple: no single market should become indispensable to India’s export strategy.

The same principle applies to energy. India must continue diversifying crude supplies from Russia, the Gulf, the United States and other reliable producers according to price, availability and strategic security. Replacing one supplier overnight merely to satisfy political pressure could raise India’s import bill and put additional pressure on foreign-exchange reserves.

The pharmaceutical warning

The pharmaceutical sector deserves particular attention. Indian companies such as Sun Pharma, Dr Reddy’s Laboratories and Lupin have deep exposure to the American market. The United States is India’s largest pharmaceutical export market, and Indian manufacturers are among the principal suppliers of affordable medicines to American patients.

There is an important distinction here. Generic medicines presently have a two-year tariff-free window under the announced US policy, after which the administration has outlined a 100 per cent tariff followed by 200 per cent. That is separate from the new Russia-sanctions legislation and should not be conflated with it. For Indian pharma, therefore, the message is unmistakable: diversify markets, invest in complex generics and biosimilars, strengthen domestic research and consider greater manufacturing presence in the United States where commercially sensible.

The RIC and the BRICS moment

India’s chairship of BRICS comes at an interesting time. India, Russia and China remain competitors in some areas but can also cooperate where their interests converge. The recent BRICS discussions have placed greater emphasis on resilient supply chains, trade, investment and alternative mechanisms of economic cooperation.

This does not mean that India should choose RIC over the West. India’s strength lies precisely in maintaining relationships with both sides of the economic divide.

China has demonstrated that tariff pressure does not necessarily produce immediate capitulation. India too must negotiate firmly, but without converting an economic dispute into a geopolitical confrontation.

What should India do now?

India’s response should be calm, firm and practical.

First, continue negotiations with Washington. Second, seek exemptions or phased arrangements wherever India’s legitimate interests can be demonstrated. Third, accelerate FTAs and diversify export destinations. Fourth, strengthen domestic manufacturing in pharmaceuticals, electronics, energy equipment and critical technologies. Fifth, expand rupee-based and local-currency trade wherever commercially viable. Sixth, maintain strategic energy reserves and multiple sources of crude.

The Indian diaspora also has a constructive role. It should explain to American society the importance of Indian medicines, technology, skilled professionals and affordable products to the US economy. The message should not be anti-American; it should be pro-partnership and pro-mutual interest.

India’s guiding principle should be neither confrontation nor capitulation. It should be nation first, but world connected. The coming months will test India’s diplomatic maturity. A tariff can raise a wall, but trade, technology, talent and mutual dependence often find doors.

India need not choose between self-respect and global engagement. The real challenge is to build an economy strong enough to negotiate with everyone—and dependent on no one.

That is the essence of strategic autonomy in the 21st century.

Be strong, and let your heart take courage, all you who wait for the Lord

— The Holy Bible