Countries like India, among others, ask for a reprieve when exporting but impose tariffs on imports to safeguard their domestic industries. Could such practices complicate international trade dynamics or be perceived as ‘conflicted’ by global partners? A lot of questions cloud the mind when delving into such geopolitical and trading diplomacy. In today’s editorial, we break down, stance by stance, what has been happening and how these acts have impacted country after country in overall development for decades.
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India’s economic diplomacy, a part of the foreign policy framework, has been marked by securing trade agreements, attracting foreign investments and strengthening bilateral and multilateral ties with key global players.
And tariffs/taxes have seamlessly blended historically into realpolitik. These import taxes have not just been used as domestic safeguard tools but also as potent international pressure tactics. While the textbook rationale for tariffs is to protect domestic industries, in practice, they’ve often been wielded as geopolitical or economic leverage.
In this view, tariffs serve to provide breathing space for domestic sectors to grow until they can compete globally.
India, for instance, as a major global economy with over 1.3 billion people, often uses this rationale when it raises duties on imports in sectors such as electronics, steel, or solar panels, all under the umbrella of its indigenous industrial development programmes.
However, history tells a more layered story. Tariffs have frequently been deployed as levers of geopolitical pressure.
One of the most striking examples is the United States under the Trump administration, which used Section 232 tariffs on steel and aluminium imports, citing national security threats. Though this appeared to be about domestic industry, it was, in fact, a strategic manoeuvre to bring allies like the EU, Canada, and India to the negotiating table. Similarly, Section 301 tariffs imposed on China were aimed at forcing Beijing to address US concerns over intellectual property theft and forced technology transfers.
The European Union, too, has used trade instruments that carry tariff-like effects to pressure other nations into compliance with environmental or human rights standards. Its Carbon Border Adjustment Mechanism (CBAM), for example, is essentially a climate tariff on carbon-intensive imports designed to compel exporters to align with the EU’s green policies.
China has also demonstrated the use of retaliatory tariffs as a pressure tactic. During the US-China trade war, Beijing targeted American agricultural exports, especially soybeans, hitting politically sensitive constituencies in rural America.
Even India has used tariffs and related measures in this way. After the 2020 Galwan clash with China, India didn’t just ban Chinese apps — it also raised customs duties, tightened technical regulations, and delayed clearances on Chinese imports.
However, the tactics do not demean the intentions. They are often a necessity for the greater good beyond national borders.
Again, coming back to India’s example, the country’s trade tax history has evolved from extreme protectionism to strategic liberalisation and now to calibrated protection. Post-independence, India followed an import-substitution model with sky-high tariffs (often over 300 per cent) to shield domestic industries and reduce foreign dependence. This lasted until the 1991 economic crisis, which forced liberalisation and a steady reduction in tariffs through the 1990s and early 2000s. India joined the WTO in 1995 and signed multiple FTAs, bringing peak customs duties down to around 10 to 12 per cent by 2010.
However, from 2011 onward, especially under the “Make in India” push, tariffs began rising again in select sectors like electronics, steel, and solar to encourage local manufacturing. Post-2020, tariffs took on geopolitical undertones, especially after the border tensions with China. India raised import duties, tightened norms on Chinese goods, and withdrew from RCEP, signalling a return to strategic protectionism.
Aluminium, specifically, is a textbook case of how India’s tariff policy straddles protectionism and global ambition. As a key industrial metal used across sectors from construction and packaging to EVs and renewables, aluminium sits at the heart of India’s growth strategy. While primary aluminium imports attract relatively low duties (around 7.5 per cent), downstream products like foils, extrusions, and rolled goods face much steeper tariffs, up to 35 per cent in some cases.
This is deliberate: India wants to protect its value-added segment, where companies like Hindalco, Jindal Aluminium, and Vedanta are trying to scale up against cheaper imports, mainly from China and Southeast Asia. At the same time, India is aggressively pushing its aluminium exports—especially semi-finished goods—into Europe, the US, and the Middle East, often demanding better tariff access in return. Aluminium, then, becomes both a shield and a spear: protected at home to build muscle and pushed abroad to win global share.
Of course, there’s a flip side. India’s high average applied tariff (about 15 per cent) doesn’t exactly scream “open for business.” For comparison, China’s average is around 7.5 per cent, and Vietnam’s sits even lower. Global investors have taken note and are not always kind. The US Trade Representative flagged India’s unpredictable tariff policy as a trade barrier in its 2024 report. And while schemes like PLI are drawing in big names, policy flip-flops and sudden duty tweaks are still making investors nervous.
Under the hood, though, the tariff structure is more nuanced. Raw materials usually see lower duties (7–10 per cent), intermediate goods sit around 15 per cent, and finished products, especially consumer durables, can face 25 per cent or more. In aluminium, primary imports face modest tariffs (7.5 per cent), but downstream products like foils and extrusions are protected more heavily. It’s all about encouraging value addition at home — build here, don’t just assemble or import.
You can see the same logic in clean energy. In 2021, India slapped 40 per cent of basic customs duty on solar modules and 25 per cent on solar cells. That move hurt short-term solar deployment, but it was designed to break dependence on Chinese imports and give Indian manufacturers like Adani Solar and Vikram Solar a fighting chance. In the long run, that’s about securing supply chains and building a green manufacturing backbone.
So, what’s the verdict? To be fair, India isn’t randomly raising barriers, either. It’s mostly playing by WTO rules, using trade remedies like anti-dumping and safeguard duties where there’s a case to be made. In 2023, India launched 35 anti-dumping probes, mostly targeting metals and chemicals from China and the EU. And in FTA talks, tariffs are more than just shields — they’re bargaining chips. With the EU, India’s dangling duty cuts on EVs and green tech, but only if it gets something in return, like relaxed norms on pharma exports or better labour mobility for Indian professionals.
