Rhetoric, Tariffs, And The ‘Dad Economy’: India’s Moment To Chart Its Own Course

The sharp escalation of tariffs by the United States against India, comprising a 25 per cent levy followed quickly by an additional 25 per cent, comes at a moment when global trade governance is fragmenting and supply chains are increasingly being used as instruments of political leverage. It is a test of India’s economic statecraft, wherein the challenge is to avoid reactive capitulation or retaliatory theatrics, and instead pursue a strategy that safeguards vulnerable sectors in the immediate term, broadens strategic partnerships in the medium term, and advances a long-term vision of what may be called the “DAD Economy”: Domestic demand as ballast, Advanced manufacturing as engine, and Diplomatic diversification as stabiliser.

The United States remains India’s largest single export market, with high-value exposure in gems and jewellery, pharmaceuticals, engineering goods, textiles and apparel, electronics, and automotive components. In previous cases of higher tariffs, Indian exporters cushioned the blow by absorbing duties, rerouting through third countries, or diverting orders to Europe and the Middle East. But at a sustained 50 per cent rate, competitiveness will erode quickly unless the government both reduces amplifiers of tariff pain—compliance frictions, uncertainty over exclusions, port delays—and expands buffers such as diversified market access, cost relief, and reliable dispute channels.

Agriculture is usually the most sensitive terrain in any negotiation involving India. U.S. trade demands have long included reduced applied tariffs on dairy, poultry, and certain fruits and nuts; changes to India’s public procurement and stockholding programmes; and wider acceptance of U.S. sanitary and phytosanitary (SPS) standards. Trading away these positions for tariff relief would undermine not only economic prudence but also political sovereignty.

India’s food security architecture is constitutionally embedded and anchored in minimum support prices, public procurement, and the Public Distribution System. At the multilateral level, the WTO’s “peace clause” already acknowledges the special needs of developing countries while negotiations on a permanent solution continue. Diluting these provisions in a bilateral bargain under tariff pressure would be tantamount to mortgaging a critical sovereign function for short-term relief. Moreover, the jurisprudence on agricultural subsidies is still live. WTO panel reports in the sugar disputes have found aspects of India’s export incentives inconsistent with the Agreement on Agriculture, but any reforms must be shaped multilaterally, not imposed through unrelated tariff leverage.

India and the US are starkly asymmetric agro-economies in terms of livelihood, with the US being a capital-intensive, highly insured one, and India being a sum of small and marginal holdings sustaining rural employment. Sudden policy-tweaks in this sensitive area may lead to import surges and farm income and consumption destabilisation, as these policies are rooted in social norms and stakeholder trust, not simply protectionism.

Examples of resolving agricultural trade irritants without breaching these red lines are available. In 2023, India rolled back retaliatory duties on almonds, apples, walnuts, and several other U.S. products, signalling goodwill without compromising core tariff bindings. The resolution of the long-running WTO poultry dispute followed a similar logic wherein adjustments were limited to non-contentious lines, while sanitary autonomy was preserved. These examples offer a template for how to say “yes” on low-impact fronts while saying “no” on the fundamentals.

Exhibit 1: U.S. Asks vs. India’s Red Lines and Possible Substitutes

Defending core positions must be matched by deeper trade engagement within BRICS, the UK, and the EU. With Russia, the priority is to sustain discounted crude flows under the G7 price-cap rules, ensure strict compliance to avoid secondary sanctions, and channel savings into renewables, domestic exploration, and storage. With China, calibrated trade in critical intermediates backed by strong rules-of-origin checks, safeguard reviews, and protection of sensitive technologies, can preserve competitiveness. In Brazil and South Africa, gains lie in mutual standards recognition for pharmaceuticals and agricultural goods, joint logistics corridors to Africa and Latin America, and New Development Bank financing for Indian manufacturing parks. With the UK, FTA deal must translate into customs cooperation, professional mobility, and digital trade provisions. With the EU, a re-sequenced BTIA could begin with attainable chapters covering government procurement transparency, geographical indications, and sustainable finance, while deferring the most contentious issues to a review clause.

Such external manoeuvres will only succeed if underpinned by domestic cost-curve improvements. A tariff shock is ultimately a competitiveness stress test. Streamlining port operations, integrating port community systems through APIs, and ensuring round-the-clock customs staffing can reduce logistics variability. Expanding low-cost export credit and hedging access for smaller exporters can mitigate financing risks. Accelerating standards harmonisation in electronics, automotive components, and pharmaceuticals would ensure that compliance costs are spread over multiple markets rather than incurred uniquely for the United States. Production-linked incentives may need recalibration away from blunt localisation targets toward measurable value-addition and export competitiveness milestones.

There is also a legal and institutional dimension that should not be overlooked. Initiating WTO dispute settlement proceedings against the U.S. tariffs will not produce rapid relief, but it will clarify India’s record, align its position with other affected economies, and keep a channel open for eventual settlement. Establishing a dedicated domestic task force to manage U.S. exclusion requests would allow India to marshal precise evidence of how specific tariff lines affect U.S. supply security—an approach that has yielded results in past tariff cycles.

By terming India as a ‘Dead economy’ and levying unreasonable tariffs on India, president Trump has brought India to the concept of the “Dad Economy”, comprising of Domestic demand, Advanced manufacturing, and Diplomatic diversification. Domestic demand provides stability in turbulent external conditions; advanced manufacturing expands the scope for value-added exports that can compete globally despite tariff or non-tariff barriers; and diplomatic diversification creates a portfolio of relationships, ensuring that no single partner can unilaterally weaponise market access. None of this requires gratuitous offence to Washington. It calls for predictability, respect for each side’s red lines, and a willingness to offer constructive alternatives.

If India can turn the present tariff crisis into a programme of market access expansion, cost-structure reform, and institutional resilience, it will not merely weather a trade storm. It will have demonstrated the operating manual of the Dad Economy: broad-based growth grounded in resilience, powered by competitive factories, and insured by many friends.