The global economy is facing a potential trade war after the US imposed heavy tariffs on various countries, including India. While India’s tariff rate of 27% is lower than that of countries like China and Vietnam, it still poses challenges for India’s labor-intensive export sectors, such as textiles and gems. This could impact domestic demand and GDP growth.

However, these new trade dynamics also present opportunities for India to re-route exports, particularly in sectors like footwear and garments. India’s government, led by Prime Minister Modi, is likely to prioritize a trade deal with the US, its largest export market, to mitigate the effects of these tariffs.

Simultaneously, India is diversifying its export markets, focusing on regions with lower tariffs, including Europe, Southeast Asia, and Africa. The country has already signed free trade agreements (FTAs) with partners like the European Free Trade Association and is in talks with others to expand its trade network.

Despite ongoing negotiations, India must address the domestic impact, particularly on sectors employing millions. The government may need to increase subsidies and adjust its strategy to remain globally competitive amidst the reshaping of global trade.