Trump's 50% tariff imposed on India, Modi stresses self-reliance.

The Trump administration’s latest trade move against India began on Wednesday, when a new 25 percent tariff on Indian imports went into effect. The sanctions, tied to New Delhi’s continued purchases of Russian oil, double the total tariff burden to 50 percent. White House officials have called the move a national security measure, and Vice President J.D. Vance told NBC News that President Trump is using “aggressive economic leverage,” including secondary tariffs, to cut off Moscow’s oil revenues.

The move puts India, long seen as a key U.S. partner in the Indo-Pacific region, among the countries now facing the toughest tariffs. The blow comes at a sensitive time for New Delhi, as the United States was until recently its largest trading partner and higher tariffs threaten to curb exports and slow growth in the world’s fifth-largest economy.

In response, the government of Indian Prime Minister Narendra Modi has sought to soften the blow. Earlier this month, Modi promised tax cuts to boost business and doubled down on calls for India’s economic self-reliance. He called the announcement a festive boost, saying the Diwali gift of a “massive tax bonanza” was for ordinary citizens and the millions of small businesses that power India’s $4 trillion economy.

Speaking to a cheering crowd dressed in saffron turbans from the ramparts of Delhi’s Red Fort on Independence Day, celebrated on August 15, Modi urged small traders to put up “Swadeshi,” or “Made in India,” signs.

“We must become self-reliant — not out of desperation but out of pride,” he said. “Globally, economic selfishness is growing and we should not sit around and cry about our problems, we should stand up and not be burdened by others.”

The rhetoric, repeated in several speeches this week, is playing well at home, but it also signals to Washington, D.C., that India intends to set a more liberal economic course even as the United States tightens the screws with new tariffs.

Modi’s call for self-reliance is seen in the Pentagon as both defiance and pragmatism. American officials say India’s export-oriented economy will have to feel the brunt of a 50 percent tariff wall, and some see it as a push to “make and spend in India” as New Delhi braces its public for tough times. It also underscores the growing divide between two governments that still call themselves strategic partners but are falling apart on trade.

India’s manufacturing sector has struggled to grow, accounting for about 15 percent of GDP despite years of subsidies and incentives to boost productivity. Experts say that by cutting taxes and simplifying the income tax, the government can directly inject liquidity into the economy, helping businesses and consumers weather the impact of Washington’s 50% tariffs.

Modi has now laid out plans to support the economy as India’s finance ministry unveiled a proposal for a two-tier GST system. “Combined with a cut in income tax from April 2025… the GST rate reform [potentially $20 billion; £14.7 billion] should provide a meaningful boost to consumption,” analysts at US brokerage Jefferies said, highlighting how the measures could shock Indian businesses and consumers. As quoted by the BBC.

Private consumption accounts for about 60% of India's GDP, making it a cornerstone of the country's economic health. Rural spending, supported by a bumper harvest, has been relatively strong, but demand for goods and services in cities has slowed, weighed down by low wages and post-pandemic job losses in key sectors such as IT.