Trump's Tariff War: 'Swadeshi economics' could be the only way to protect India's interests

India will have to prepare its industries for global competition in a protective environment.

(Sanghnomics is a weekly column that tracks down and demystifies the economic world view of Rashtriya Swayamsevak Sangh (RSS) and organisations inspired by its ideology.)

In wake of President Donald Trump putting pressure on India to reduce tariffs for imports from the United States, a new debate has kicked off about what could be India’s way forward. Should India reduce the tariffs as Trump wants and open its agriculture market to the US imports or is there any other solution?

The issue was discussed at length in the national council of Swadeshi Jagaran Manch (SJM) at its national council meeting in Raipur (Chattisgarh) on 9-10 March, 2025. The SJM is an organisation inspired by the Rashtriya Swayamsevak Sangh (RSS).

The SJM passed a detailed resolution in this meeting that recommends strategic options for India to resolve the contentious issue of tariffs while protecting national interests.

To begin with, it is important to counter the US narrative that India has been imposing high tariffs. The SJM resolution puts it aptly, “In view of a frontal attack of US on our exports, on an illegitimate argument that India imposes higher tariffs, and likely increase in tariffs by them, once again underlines the importance of Swadeshi.”

It is ironic that historically it was the US and its allies who had pushed the world towards free trade. Through the World Trade Organisation (WTO) they tried to introduce a rule based global trading system. The SJM was never in favour of the WTO as it gave rights to the US and its powerful western allies to impose country specific tariffs, if and when they wished to do so. In spite of extensive protest from Swadeshi Jagran Manch, the then Indian Government signed the WTO agreement.

SJM has again put it on record that it was never in favour of the biased globalisation and liberalisation that was loaded structurally against countries like India. “Since 1990s, a belief has been gaining ground that the policy of liberalization, globalisation and privatisation is the only way forward for the world, especially developing countries though Swadeshi Jagran Manch was always against liberalisation and globalisation as was being presented,” reads the SJM resolution. Ironically, many supporters of the unbridled globalisation and liberalisation had targeted SJM initially. But the proponents of ‘Swadeshi’ economics stand vindicated now.

After swearing in as the President, Donald Trump has launched a full frontal attack on the global free trade system by announcing his intent to impose higher tariffs (on a reciprocal basis) on imports from many countries around the world. It intention is to bring back manufacturing in the USA so that issue of unemployment is addressed.

The SJM’s prognosis of US’ stand on tariffs is quite interesting and it could provide a framework for India to deal with this complex situation.

Prognosis of Problem

According to the SJM, the US - once the biggest supporter of free trade and a rule-based global trading system - has suddenly realised under Donald Trump that for decades it has bought more goods from the rest of the world than it sold, and now they are facing a huge trade deficit.

In 2024, the US had a huge trade deficit of $918.4 billion. Donald Trump wants to reverse this situation. But it is worthwhile to know the background of initial negotiations at WTO. The developed countries, including America, in bargain with developing countries, allowed imposing higher tariffs on goods than developed countries for accepting new issues in GATT and signing agreements on TRIPS, TRIMS, agriculture and services. So, it was a bargain at that time which US is now consciously ignoring.

The WTO system greatly benefited the US and other developed countries, as it paved the way for a strong patent and other IPRs (Intellectual Property Rights) regime, which benefited their pharma and other companies, by way of royalties for their IPR, opened the doors of developing countries for investment by multinational companies and opened markets for US agricultural products in developing countries including India

Way Forward

According to proponents of Swadeshi economics, the first contour of the way forward strategy for India is to go for bilateral agreements instead of the multilateral agreements. The SJM categorically said in its resolution, “..Swadeshi Jagran Manch strongly suggests that Bharat should enhance its foreign trade with bilateral trade agreements rather than multilateral trade agreements. However, while entering into bilateral trade agreements with the US and other countries, national interests should be protected, especially our farmers and small entrepreneurs.”

Further, it says the unequal WTO agreements have adversely impacted our public health, farmers, industry and the common man. “While making it very clear that SJM is not against promoting international trade, we firmly believe that multilateral trade agreements are not good for the economy, as there is no point giving Most Favoured Nation treatment to all countries. The Government of Bharat has also stated that bilateral arrangements are going to be the order of the day as Multilateralism is on its way out,” says the SJM resolution.

The second of the way forward strategy is to give a further boost to the policy of “Atmanirbhar Bharat”. This policy has also started giving dividends. India will have to prepare its industries for global competition in a protective environment.

The third contour of the way forward is that while entering into bilateral trade agreements with US and other countries, national interests should be protected, especially our farmers and small entrepreneurs.

Most significantly, the SJM has unequivocally appreciated Modi government’s approach as it said in its resolution, “In the past we have observed that in the last 10 years, government has been protecting the interests of farmers and their livelihood, while negotiating trade agreements, whether it was a regional trade and investment agreement, RCEP, from it withdrew, due to concerns of its adverse impact on dairy and agriculture. This policy needs to continue, so far as agriculture and small industry is concerned, especially where livelihood of farmers and workers is involved.”

Earlier Sanghnomics columns can be read here.