India’s BRICS Moment: From Tariff Threats to Trade Leadership

“With $825 billion in exports and rising global clout, India has the tools—and now the imperative to rally BRICS as an alternative trade engine.”

Tariffs as a Geopolitical Lever

The global economic landscape is currently witnessing a significant escalation in trade tensions, exemplified by the recent imposition of an additional 25% tariff by the United States on Indian exports. This measure, effective August 27, raises the total tariff rate to a substantial 50%. This unilateral action by the US is explicitly linked to India’s continued purchase of discounted Russian crude oil. Such a move represents a profound challenge to India’s energy sovereignty and its foreign policy autonomy, extending beyond traditional trade disputes into the realm of geopolitical leverage. The US tariff is not merely an economic measure; it functions as a geopolitical tool, designed to influence India’s alignment in the broader international context, particularly concerning the Russia-Ukraine conflict. This approach highlights a growing trend of economic policy being utilized to achieve strategic foreign policy objectives, effectively weaponizing trade and finance.

India’s Economic Crossroads

India is today the world’s third-largest economy in purchasing power parity terms and it faces direct economic costs from this unilateral action. Nearly $87 billion in Indian exports to the U.S., spanning jewelry, textiles, pharmaceuticals, machinery, and refined petroleum, will be hit. Analysts estimate that if enforced fully, the duties could trim up to 0.6% from GDP, with sectors like gems and jewelry (worth $10 billion annually) and seafood (about $3 billion) most vulnerable.

However, the story is not all bleak. India’s economy retains a degree of resilience. Domestic consumption accounts for about 60% of GDP, creating a natural cushion against external shocks. Russian oil, which made up 35–40% of India’s imports in 2024, has saved billions and stabilized domestic fuel prices, ensuring affordable energy. In the short term, a depreciating rupee could soften the blow by making Indian exports cheaper abroad. But prolonged tariffs would still erode competitiveness, inflate import costs in U.S.-linked sectors like technology, and unsettle investors.

The long-term risk lies in disrupted supply chains and cautious investment flows into critical industries like technology and pharmaceuticals, where U.S. markets remain central. Yet there are opportunities: India can accelerate export diversification towards BRICS+, the Gulf, and ASEAN. The much-discussed “China plus one” strategy, where global firms invest in India not merely as a U.S. export base but to serve its large domestic market could further blunt the fallout from tariffs.

 

BRICS+: From Acronym to Alternative

BRICS, coined in 2001 as a Goldman Sachs acronym, has matured into a political and economic bloc of the Global South. Its initial goals were modest: greater coordination and legitimacy in institutions like the UN, IMF, World Bank, and WTO. After the 2008 financial crisis, the original members – Brazil, Russia, India, and China, later joined by South Africa and they began to coordinate within the G20, demanding reforms to reflect the growing weight of emerging economies.

The bloc has since undergone a dramatic expansion. In 2024–25, Saudi Arabia, UAE, Egypt, Ethiopia, Indonesia, and Iran joined, creating BRICS+. This expansion is a deliberate strategic response to perceived imbalances in global governance, aimed at strengthening the collective bargaining power of the Global South. Together, these eleven nations now represent approximately 46–49% of the world’s population, 36% of its landmass, 39% of global GDP, and nearly a quarter of global trade. Its size dwarfs the G7 in population and rivals the EU in trade influence.

Despite this considerable collective share in global trade, the proportion of trade conducted within the BRICS bloc is notably lower. For instance, trade among BRICS nations comprised 13% of their total trade in 2021. This disparity between the bloc’s overall global trade presence and its internal trade volume suggests that BRICS currently functions more as a collective voice in global economic and political forums rather than as a deeply integrated trade bloc, such as the European Union. The majority of trade for individual BRICS members remains directed towards external markets. This indicates that while the bloc exerts significant influence on global economic trends, its internal economic integration, characterized by intra-bloc trade, is still developing and does not yet represent the primary focus of its members’ trade activities

Intra-BRICS trade has demonstrated a robust growth trajectory over the past two decades. From 2002 to 2021, the total global trade of all BRICS countries experienced a more than sevenfold increase, expanding from USD 572 billion to over USD 4.2 trillion. This expansion has been accompanied by a notable increase in intra-group trade, contributing to a reduced dependence on traditional markets outside the bloc. The broader trend of South-South trade, which includes intra-BRICS exchanges, has also seen significant growth, more than doubling to $5.6 trillion between 2007 and 2023, thereby creating new avenues for growth and regional integration.

India’s trade with BRICS+ reflects both promise and challenge. In FY 2023–24, total goods trade reached $335 billion—exports of $82 billion (19% of India’s total) against imports of $253 billion (37% of total imports). The imbalance is stark: BRICS+ countries account for 71% of India’s trade deficit, with China alone contributing over a third. Imports from Russia, mainly oil, have surged, while Chinese manufactured goods dominate. This reliance raises vulnerabilities but also points to opportunities: India can push for greater market access for its exports within BRICS while working to reduce concentration risks.

What BRICS Must Do?

For BRICS to serve as a counterweight to U.S. unilateralism, it must move beyond symbolism to substance. Four strategies stand out:

• Leverage BRICS Trade and Diversify Supply Chains:
  The U.S. tariffs could become the catalyst for India to deepen trade within the bloc. Expanding markets for textiles, auto parts, and pharma into Brazil, China, or Saudi Arabia is both an economic necessity and a strategic hedge. Enhanced currency swap lines and digital payment systems can insulate members from dollar-dominated sanctions.
• Use BRICS Financial Mechanisms:
  The New Development Bank (NDB), with $39 billion already disbursed, is a tangible alternative to Western lenders. It should prioritize funding Indian infrastructure and industry to reduce global supply chain exposure. The NDB’s ability to raise debt in local currencies offers an added shield against external shocks.
• Strengthen Energy Cooperation:
  Russia’s discounted crude underpins India’s energy security. BRICS must formalize such flows, ensuring stable, sanctioned-proof supply chains. A collective approach to energy through pooling resources, refining, and even green transition investments can buffer members against U.S. economic pressure.
• Forge South–South Alliances:
  Beyond economics, BRICS should expand partnerships with Africa, Latin America, and middle powers in Europe to build a multipolar network. Reviving initiatives like RIC (Russia–India–China) can dilute U.S. leverage.

The Game Theory of Tariffs

Trump’s tariffs are a “first move in a repeated game”—signaling that America is ready to weaponize trade to extract concessions. If India confronts this alone, the U.S. maintains the advantage. But with BRICS behind it diversifying trade, creating financial alternatives, and signaling collective retaliation could change the payoff matrix. The U.S. faces not one actor but a coalition, shifting incentives toward restraint. In institutional economics terms, BRICS functions as a club good: individual members pool resources to secure benefits (market access, financing, energy security) none could achieve alone.

The India Moment

The US tariffs present a clear challenge, but they also offer an opportunity for India to strengthen its position as a leading voice in the Global South. By deepening its engagement with BRICS, India can work to protect its national interests, secure its energy supply, and build new avenues for trade. The collective economic power of BRICS, representing a significant portion of the world’s GDP and population, can provide a strategic alternative to the current global order and demonstrate that unilateral economic pressure will not go unchallenged.