• Article covers trade and geo-politics because both are intertwined. What does U.S.A. want? What is President’s Trump’s approach and Implications? 15 IDEAS how India can respond to Trump August 1 Tariff-25%. . 

Tariff of 25% from August 1 said U.S. President Trump plus a Penalty for buying Oil from Russia and probably Arms too. India runs a huge trade surplus with the U.S. made headlines in India and often referred to in President Trump’s tweets. 

This article looks at both the trade and geo political issues. It covers what does U.S.A. want? What is President’s Trump’s approach and Implications? 15 IDEAS how India can respond. Fyi India exports are app $ 87 billion. 

Background

A learned economist said, “Trade is only merchandise. Current account includes services, remittances and primary income. Primary income is what the country earns on its foreign assets minus what it pays for its foreign liabilities.”

Simply put a trade deficit takes place when a country imports more of merchandise than it exports. It results in say a USA consumer funding economic investment and incomes in the exporting country.

This adversely affects jobs/economic activity in importing country say USA. That is why Trump wants more U.S. consumed goods to be produced locally. Even though imports mean lower cost/adequate supplies for U.S. consumers.

A country with a trade deficit has to find ways to fund the deficit. In case of consistent deficit it shall need to borrow money from abroad. If the country’s savings rate increases that can fund this deficit. If critical items are imported like semiconductors it has a bearing on national security. Sometimes countries devalue their currencies to boost exports like India did in 1966. 

USA is hoping that signing of Free Trade Agreements (FTAs) shall promote U.S. exports and reduce its trade deficit. This and revenue from higher tariffs might reduce its fiscal deficit and government debt.

India lost the Narrative by not referring to Trade Deficit adjusted for Services

According to a Hindustan Times report of 31/7/2025, “According to government data, India had a $41.18 billion trade surplus with the US in 2024-25. The US gains significant revenue from financial, digital and e-commerce services, fees from students studying in America and defence deals. Ajay Srivastava, founder of Global Trade Research Initiative, said the US “quietly rakes in $80-85 billion every year from India through education, digital services, financial operations, intellectual property royalties, and arms sales.”

Simply put there is a trade deficit because the U.S. is more of a services than a manufacturing economy (outsourced to China). As Ajay S implied, adjusted for education etc, the U.S. has a surplus of $ 30-35 billion with India.

The Government of India, Media and Intellectual class have a barring a couple like Ajay Srivastava failed to consistently highlight this fact, within India and on social media.

What does U.S.A. want – key points? 

Trump Administration wants to increase sales of farm and dairy products, use of genetically modified seeds, allow online companies like Amazon and Flipkart allow to operate the same way as Reliance Jio and Spencers amongst others do and buy Arms and Boeing Aircraft (implied do not buy from Russia/Europe). U.S. ignores that its animal feed might have Beef, whose consumption is a sensitive issue in Bharat. 

In short, the U.S.A. want open access to the huge Indian market, 140 crore Indians. Just like what it had with China some 15-20 years ago.

The U.S. wants India’s help, actually Europe and Japan too, to re-build its economy, reduce debt so ‘America becomes Great Again’. Has to be  win-win.

What is President’s Trump’s approach? 

Be in the news daily with tweets or statements.

Make the environment ambiguous and uncertain.

Push other countries hard. You are either with the U.S. or against it.

Make grand announcements of investment plans by trade partners – it does not matter if that is backed by a written agreement. Intent is to create impact in the short-term.

Needle India by supporting Pakistan tacitly or saying U.S.A. exploring closer ties with it. Knowing that Indians dislike India being hyphenated with Pakistan.

Push countries to buy more American Arms. Perhaps, Arms manufacture is a big contributor to U.S. GDP and government revenues.

When a country like China pushes back by say stopping exports of rare earths, back off.

Technology firms like Microsoft are an extension of U.S. administration policies. Note “Microsoft abruptly suspended core communication and productivity tools used by Nayara, part owned by Russia’s Rosneft, an in attempt to comply with European Union Sanctions.” MINT 31/7/25 If Big Tech pulls the plug: Lessons in Nayara’s tale

Trump ji badly wants the Russia-Ukraine War to end but knows the Europe imports lots from Russia. So pressurise countries like India and China.

It appears that Trump ji wishes to be remembered in history as someone who promotes peace (read as U.S. way), so keeps on stating how he prevented a nuclear war in the Indian Sub-continent.

Implications of this approach

The U.S. is an unreliable partner. It wants India to buy more arms but GE has failed to deliver engines in time for Tejas Mark-1A jets (two years behind schedule) Source 

U.S. arms are expensive compared to Russia and invaraibly, there is little technology transfer.

Big Tech firms will always toe the U.S. government line. Countries have to design their own Operating System.

U.S. business like Amazon should be allowed unhindered access to large markets like India. Realize U.S. is a large country with a smaller population.

Ukraine’s desire to be part of NATO (some believe needled by the West) and subsequent Ukraine War pushed Russia into China’s welcoming arms.

Americans must realize that Indian Pharma companies have made medicines affordable in the U.S.

So what must India do?

1. Keep the door for negotiations open, study the Tariff notification, do not PANIC and wait for details. Net net analyse and evaluate impact.

2. There is no need for India to be DEFENSIVE that U.S. companies might close down GCC (Global Capability Centres) or reduce outsourcing work to Indian Information Technology Companies. 

U.S. companies are doing business in India because it Indian companies/people ADD VALUE to their operations and enhance profits not out of a sense of charity. Yes, there might be temporary disruptions – we have to live with it. Read Chapter 2 of the Bhagavad Gita for strength and How the Gita taught me to enjoy life.

3. Undertake Reforms at the Centre and State levels. 

4. Put Disinvestment on a Fast Track so India’s fiscal deficit remains within limits.

5. Do not give too much importance to U.S. dealings with Pakistan. Be aware and alert. If the U.S. wants to woo Pakistan inspite of Osama Bin Laden (responsible for September 11) being sheltered and killed in Pakistan, the U.S. will pay for its karmas.

6. India’s response to Terrorism must not change. 

7. The MAKE IN INDIA program needs to be in mission mode now.

8. Expedite joint-ventures /technology transfer agreements with British and French companies to make Tejas Mark1A etc engines in India.

9. Simultaneously, keep the door open with the U.S. for purchase of arms – joint development and launch of satellites and QUAD. 

10. India should not make public statements criticising Trump. When a man has huge ego, public criticism makes it difficult for him to accept for a compromise.

11. Protect NATIONAL INTERESTS – farmers, MSMEs and traders. 

12. India’s exporters might explore new markets to reduce dependence on U.S.

13. Take the Opposition into confidence on strategy so they might not speak on Trump’s behalf to score brownie points against the BJP government.

14. Since Yoga originated in India, send Legal Notices to all Yoga Studios in U.S.A. for infringement of intellectual property rights. 

15. China might now nudge India for a Russia-China-India alliance. Remember CHINA is ENEMY NUMBER 1.

Also read

1. What is Trade Deficit

2.  Ashrams in Los Angeles

3. San Jose Gurdwara

4. India Today Report on 25% Tariffs