India is adopting a cautious and calculated approach to the impending announcement of U.S. President Donald Trump’s “reciprocal tariffs,” set to be revealed on April 2. Unlike many other major economies that have opted for more immediate reactions, India is choosing to assess the actual impact of these tariffs before determining its response. This considered stance reflects India’s broader strategy in evaluating trade deals and tariffs. Indian officials have indicated that they have prepared for four possible scenarios that outline the potential effects of these tariffs on the nation’s trade and economy.

Trump’s “Liberation Day” tariffs are expected to be announced at 4 p.m. local time on April 2 (early Thursday morning in India). On Monday, President Trump suggested that India, among other nations, will be reducing its tariffs in response to the new measures. This rhetoric has raised questions about how India will manage its tariff policies, particularly in light of its existing trade agreements and its stance on global trade issues. While some countries have been quick to react to similar tariff policies in the past, India’s measured approach signals its intent to prioritize its trade negotiations and diplomatic relations over immediate policy changes.

Indian officials have reportedly mapped out four scenarios in preparation for Trump’s announcement, each with differing implications for Indian trade. The first scenario focuses on product-specific tariffs, where countries like China, Mexico, Canada, and those in the European Union (EU) could see the most significant impact. In such a case, India’s exports could become more competitive due to reduced competition from these countries. The second scenario, which focuses on sector-specific tariffs, would affect all global players, including India, by increasing costs and narrowing profit margins. The third and fourth scenarios involve country-specific tariffs and secondary tariffs, both of which could have negative effects on India’s economy, according to officials familiar with the matter.

The Indian government’s stance is influenced by its focus on evaluating trade agreements not just based on tariff levels but on overall trade complementarity. This approach is exemplified by India’s free trade agreement (FTA) with the United Arab Emirates (UAE), which has resulted in a zero tariff on liquefied natural gas (LNG) imports. India’s energy needs and the absence of domestic competition for LNG imports from the UAE justify this tariff reduction. This example highlights India’s broader view that trade deals should be evaluated on the net impact, considering factors beyond just tariffs.

India’s calm approach to the anticipated tariffs is also shaped by the progress made in ongoing bilateral trade negotiations between the U.S. and India. Despite the challenges posed by the global economic climate and U.S. trade policies, both countries have continued constructive discussions. In fact, a recent four-day round of talks in New Delhi regarding a Bilateral Trade Agreement (BTA) reportedly went well, further encouraging Indian officials to adopt a wait-and-see approach. The two nations are also aligned on their broader goal of strengthening bilateral trade, which includes the target of increasing total trade from $200 billion to $500 billion by 2030, as part of the ambitious “Mission 500.”

Meanwhile, in Washington, Trump has stated that countries, including India, will significantly drop their tariffs in response to his reciprocal tariff proposal. He pointed to the European Union’s reduction of car tariffs to just 2.5% as an example of a positive move towards tariff reduction. The U.S. administration’s focus is on ensuring that countries, especially those that have been imposing higher tariffs on American goods, engage in reciprocal reductions. While India’s response is still being formulated, it is clear that the country is taking a thoughtful approach to the issue.

In addition to the proposed tariff measures, reports indicate that the U.S. is considering implementing a tariff of around 20% on a wide range of imported goods. The White House has not made a final decision on this plan, and multiple options are reportedly being discussed. These tariffs could have a significant impact on global trade dynamics, particularly for countries like India that are heavily reliant on exports to the U.S.

India’s response stands in contrast to that of the European Union, which has already prepared strong retaliatory measures, including counter-tariffs on up to €26 billion of U.S. goods. Similarly, the United Kingdom is still working to finalize trade agreements with the U.S. to mitigate the impact of potential tariffs. In comparison, India appears content to let its ongoing dialogue with the U.S. continue based on the framework established by the joint statement between Prime Minister Narendra Modi and President Trump earlier this year.

Furthermore, India is closely monitoring regional economic developments, particularly in Asia. China, Japan, and South Korea recently held their first economic dialogue in five years, focusing on strengthening supply chain cooperation. This regional collaboration may have significant implications for India’s trade policies and its role in the broader Asian economic landscape.

As India continues to evaluate the potential impact of Trump’s reciprocal tariffs, it remains clear that the country is taking a long-term view on its trade relationships. India’s measured approach to these tariffs is a reflection of its broader trade philosophy, which emphasizes sustainable economic partnerships over reactive measures. While the U.S. administration is pushing for tariff reductions, India is positioning itself to navigate the evolving global trade environment with a focus on complementary trade agreements and strategic negotiations.