August 28, 2025 07:13 AM IST First published on: Aug 28, 2025 at 07:13 AM ISTShareIn 1990, military strategist Edward Luttwak coined the term “geo-economics”. Loosely, it is about using economic strength as a tool to achieve strategic and foreign policy goals, rather than solely for economic welfare. Enter US President Donald Trump with his expected transactional approach, which caught India unawares. Though it is safe to think that, over time, the 50 per cent tariff that came into effect on Wednesday will be whittled down to 20-25 per cent.The UK has succumbed to 10 per cent, the EU 15 per cent, Indonesia 19 per cent and Vietnam 20 per cent import duty. More countries are poised to do the same. It is important to work out the math. India refusing trade concessions and paying 20-25 per cent may be the better option when compared to opening the Indian agricultural markets. In practical terms, India would be competing with a disadvantage of about 5 per cent, which the country can live with. In ignoring the things that governments do right, we omit half the story, and farmers should appreciate the PM’s reaffirmation to safeguard Indian farmers’ interests.AdvertisementHowever, the impact of tariffs will broaden beyond directly affected industries. Growth in the manufacturing sector is an absolute imperative for creating employment. Despite the high-profile “Make in India” campaign, the share of manufacturing in GDP is still 14 per cent, well short of the 25 per cent target set for 2025. After 10 years, possibly for the first time, there are more unemployed graduates than non-graduates. There is a danger that not only will existing manufacturing be hit, but that businesses will see no reason to grow their businesses in India. Growth, then, does not just stall; it starts contracting.China created globally successful companies by subjecting them to fierce competition, not protection. In contrast, Indian manufacturing is a pampered space, failing to deliver on expected growth or employment generation. It remains uncompetitive. It is about time for the industry to get a small, bitter dose of tariff therapy.Allowing agricultural imports with quantitative quotas from the US should be acceptable if it results in import duty concessions for India’s manufacturing sector. Such imports could be problematic but manageable, given that normally these are a few percentage points of the production of a particular crop. India is a humongous importer of such agricultural produce as pulses and edible oil, of which some quantity could be specifically allocated for US imports. I would treat this not as a capitulation but as pragmatism. Farmers and the government have observed that if Indian farmers are not allowed to grow GM crops, there is no justification for allowing the import of GM crops. That is a valid point as per the World Trade Organisation (WTO) — but its dispute resolution mechanisms, especially vis-à-vis the US, are all but defunct.AdvertisementDairy, however, is the backbone of small farmers’ livelihoods in India. The American dairy sector will find it tough to compete with the Indian dairy sector. Instead, the American corporate sector can and will use predatory pricing to sell its produce at a loss for 10 years to kill the Indian dairy sector. Once the Indian farmer stops keeping milch animals, it will be difficult to get farmers to rear them again. This will be a death knell to the rural economy.India recently signed a trade deal with the UK, allowing for duty-free Indian agricultural imports. While the deal appears to be a good one, India’s internal regulatory issues with agricultural inputs will lead to high-value farm exports failing the UK’s safety norms at ports of entry. These may well be termed “non-tariff” barriers later. Besides, concessions around “data” appear to be an oversight.There is also the issue of the quantum of subsidy the US or EU give their farmers vis-à-vis Indian farmers, which is neither new nor unexpected. Whining about it is not an effective strategy for the future. Realism is all about dealing with the circumstances, not the ones that one may want to.most readA trade deal is not the end of the road, but an important step forward. Our policies and structures must evolve constantly to be competitive in the future. Since the WTO came into being, the US, China and the EU have regularly changed their farm support mechanisms. India did not and now runs afoul of the WTO. As far as the Regional Comprehensive Economic Partnership (RCEP) treaty is concerned, many exporters of basmati rice, coffee and tea, which initially opposed the RCEP, now regret their position.The WTO is not dead, and the concessions that the US extracts from India will inevitably become part of the WTO 2.0. The EU, with which India hopes to seal a trade deal soon, will demand the same concessions. A graver issue than the tariffs is the acceptance of US standards and certification.A once-in-a-generation opportunity beckons, provided the establishment wakes up from its slumber. Not only is the population in the developed world ageing, but it is also shrinking. Radical nationalism will not allow countries to bring in cheap migrant labour, and, in less than 20 years, they will not have sufficient people to work on their farms. Since Trump took charge, the price of fruits and vegetables in the US has already gone up 35 per cent. To prepare, India needs improved regulation and governance, for which it lacks administrative and political capacity.One view is for nations to simply hang on till the midterm elections in the US, when a political reset is expected. The bottom line is that there is no finality to the trade negotiations with the US. Like the Russian oil tariff, the next barrier will be the carbon tax.The writer is chairman, Bharat Krishak Samaj