A diplomatic masterclass: How India's 'tortoise' strategy won the US trade war

After tottering on the edge for months, India and the US have finally managed to work out a historic trade deal, which, according to President Donald Trump, will take effect immediately. But what changed, and how did India pull off a ‘victory’ from the jaws of defeat?

The Narendra Modi government used a mix of silence when it came to provocative statements by the American First Gentleman, and a bunch of definitive signalling when it came to trade, all accompanied by tenacious diplomatic manoeuvring.

As it turns out, both nations have had to make concessions — that is normally how a deal works. But for India, it is very much an achievement in ensuring not just the status quo of its trade balance, but the larger future prosperity.

When President Trump announced his “Liberation Day” tariffs on April 2 last year, India initially appeared to have escaped relatively unscathed. Its initial tariff of 26 per cent seemed much lower than its competitors in the export sweepstakes, fellow economies like China, Vietnam, Bangladesh etc. However, Trump’s ire over India’s buying of cheap Russian oil suddenly led to punitive tariffs, which debilitated about half of India’s merchandise exports to the US with a hefty 50 per cent plus tariff.

There was also the risk of further escalation if the ‘Sanctioning Russia Bill’ were passed by American lawmakers, as it proposed raising tariffs to as high as 500 per cent.

But all is well, for now, with both Trump and Modi back to being “greatest friends” with a deal of 18 per cent tariffs, which puts Indian exports in good standing against competitors like Vietnam (electronics and other manufacturing), Bangladesh (textiles).

How India pulled it off is no less than a master lesson in ‘tortoising’ — a slow and steady tenacious approach in dealing with the demands.

First, it did not bow down to the initial set of demands, which ranged from opening up the entire market, including agriculture and dairy. While details of the final deal need to be checked for fine print, Trump’s mention of ‘agricultural’ would mean some sort of bending over by India, but it is likely on select premium goods and most definitely excludes dairy, which is a political hot potato in India.

The biggest clawback from India was its speeding up of trade deals. While last week’s mega deal with the European Union grabbed headlines and possibly led to a softening of American adamancy, it wasn’t the only one. From a free trade agreement with the UK in July to one with the European Free Trade bloc (which has countries like Switzerland and Iceland; signed in 2024 but coming into effect four months ago), Oman as well as New Zealand. India’s sudden FTA signing spree did not go unnoticed in Washington — note this is the same country which left the China-led RCEP trade block infamously back in 2019 and hardly had any trade deals in place except some inconsequential or ineffective (or both) ones with a clutch of fellow Asian countries over the past two decades.

It also helped that Indian exports did not collapse under the weight of the 50 per cent tariffs imposed since August, largely because two critical sectors—electronics and pharmaceuticals—were exempt. This exclusion stems from India’s position of strength — any electronics tariff would have only impacted American multinationals like Apple, while nearly half of the generic prescription drugs used in the US is exported from India. Even trigger-happy Trump would hesitate to cut off the flow of affordable medicines to his electorate, no matter his provocative pronouncements (he once threatened “massive unprecedented tariffs” on imported drugs, at 100% tariff or even more).

In fact, many of the bigger Indian exporters stepped up, offering to cover the additional cost incurred by their clients in the US — meaning exports to the US did not suffer any dramatic fall because of the tariffs, though there was a slump in certain sectors and in certain months.

India also diversified, with trade with China picking up substantially. In fact, last year, China overtook the US as India’s biggest goods trading partner at 110 billion dollars (April-December 2025) compared to the US at 105 billion dollars.

India also had the strength of its substantial domestic economy, with structural reforms focusing on pushing consumption (income tax and GST cuts) and ‘Atmanirbhar’ manufacturing. Last week’s Economic Survey also talked about "a slew of policy measures and strong domestic fundamentals" helping India absorb the shock of US duties.

Even during the negotiations, India seemed to have worn out the US by sticking to certain ‘no-go’ areas and the way it postured with its slew of alternative measures. However, in the end, reason seems to have prevailed: the US needs the world’s largest open market (China has a closed ecosystem) as much as India needs the world’s most valuable market, especially considering the future growth in investment and its dream of becoming a manufacturing hub for the world. The fine print, and future trade will tell us whether the sacrifices have been worth it.