Raghuram Rajan Warns: Trump's 50% Tariff Threat Signals 'Broken Down' India-US Ties

Former Reserve Bank of India (RBI) Governor Raghuram Rajan has issued a stark warning regarding the potential implications of former US President Donald Trump's proposed 50% tariff on Indian goods, describing it as a critical 'wake-up call' and a clear indicator of a deteriorating India-US relationship.

Rajan's comments underscore a significant shift in global trade dynamics and an urgent need for India to reassess its strategic position.

Speaking on the escalating trade tensions, Rajan didn't mince words, asserting that the India-US relationship has 'clearly broken down' under the weight of such protectionist threats.

He highlighted that while India might traditionally consider the US a crucial ally, the current rhetoric and policy proposals from the Trump camp suggest a transactional and potentially hostile approach that India cannot afford to ignore.

Rajan emphasized that these proposed tariffs, if implemented, would not merely be an economic skirmish but a fundamental challenge to India's export-oriented sectors.

A 50% tariff would effectively price Indian goods out of the US market, forcing industries to rapidly re-evaluate supply chains, production strategies, and market diversification. This could lead to significant job losses and economic disruption if not proactively addressed.

The former RBI chief urged India to recognize that the global economic landscape is increasingly characterized by protectionism and geopolitical realignments.

He stressed that India must shed any complacency about its international partnerships and develop robust, self-reliant economic strategies. This 'wake-up call,' as he termed it, demands a comprehensive review of India's trade policies, investment avenues, and diplomatic engagement, moving beyond traditional alignments.

Rajan also pointed out that such aggressive trade policies by a major global player like the US could trigger a domino effect, inspiring other nations to adopt similar protectionist measures.

This could fragment global trade, making it harder for emerging economies like India to thrive through exports. He suggested that India needs to actively seek and strengthen alternative trade alliances and domestic consumption to insulate its economy from such external shocks.

In conclusion, Rajan's commentary serves as a powerful reminder for India to bolster its economic resilience and recalibrate its foreign policy in anticipation of a more volatile and less predictable global order.

The threat of steep tariffs from a historically significant partner necessitates a pragmatic and decisive response, transforming a potential crisis into an opportunity for strategic introspection and economic reorientation.