U.S.-India Trade Tensions and the BRICS+ Pivot: Navigating Risks and Opportunities in Emerging Markets

The U.S.-India trade relationship has entered a volatile phase, marked by Trump-era tariffs that have reshaped India’s economic strategy and global positioning. Effective August 27, 2025, the U.S. imposed a 50% tariff on Indian exports, citing India’s continued purchases of Russian oil as a “punishment” for undermining Western energy policies [1]. This move, layered atop existing Most-Favored-Nation (MFN) duties, threatens $12.5 billion in Indian exports, particularly in textiles, gems and jewelry, and leather—sectors that employ millions and anchor India’s labor-intensive economy [1]. The immediate fallout has been stark: stock indices like the Nifty 50 and Sensex plummeted by 700 points, while foreign institutional investors (FIIs) accelerated outflows, exacerbating market volatility [6].

Strategic Rebalancing: India’s BRICS+ Pivot

Faced with U.S. pressure, India has intensified its engagement with BRICS+ partners, leveraging the bloc’s collective economic weight to diversify trade and finance. The 2025 BRICS Summit in Rio de Janeiro underscored this shift, with member states pledging to triple bilateral trade and expand digital payment systems under the BRICS Pay platform [3]. India, while resisting calls for a common BRICS currency, has embraced de-dollarization in practical terms, settling oil purchases with Russia in rupees and UAE dirham to bypass U.S. dollar dependencies [1]. This strategy aligns with broader BRICS+ goals to reduce exposure to Western financial systems, a move analysts argue could catalyze a 50-60 basis point drag on India’s GDP growth if tariffs persist [1].

The New Development Bank (NDB) has emerged as a critical enabler of this pivot. By 2025, the NDB had committed to co-finance India’s renewable energy projects, including solar parks and wind farms, while supporting green hydrogen initiatives under the $6,000 crore budget allocation [5]. These investments are part of India’s 500 GW non-fossil fuel target by 2030 and its ambition to become a global green hydrogen hub. Meanwhile, BRICS+ nations are advancing cross-border industrial integration, such as battery plant projects in Indonesia backed by Indian and Chinese capital [3].

Sector-Specific Opportunities and Risks

Energy: India’s energy transition is gaining momentum, with the government prioritizing grid modernization, smart grids, and 100 GW of nuclear capacity by 2047 [5]. BRICS+ partnerships, including joint solar manufacturing with Oman and Malaysia, are reducing reliance on U.S. and European technology. However, the U.S. tariffs have exposed vulnerabilities in export-dependent sectors like textiles, where a 30% price erosion on U.S.-bound shipments could force production cuts and job losses [1].

Manufacturing: The Production-Linked Incentive (PLI) scheme and Advanced Chemistry Cell (ACC) battery storage initiatives are bolstering domestic manufacturing, but U.S. tariffs threaten to disrupt supply chains. India’s $87 billion export basket to the U.S. now faces a 55% exposure risk, particularly in gems and jewelry [5]. To mitigate this, India is diversifying into markets like the Middle East and Southeast Asia, with bilateral investment treaties (BITs) signed with Saudi Arabia and Qatar offering legal certainty for foreign investors [1].

Technology: India’s tech sector, including pharmaceuticals and semiconductors, remains relatively insulated from tariffs, but U.S. restrictions on rare earth exports to China have created indirect risks. India’s collaboration with Russia on critical minerals and its participation in BRICS+ digital innovation hubs are countering these pressures, though long-term reliance on Western technology for advanced manufacturing remains a challenge [3].

Capital Flows and De-Dollarization Dynamics

India’s FDI landscape in FY 2024–25 reflects this strategic recalibration. While gross FDI inflows rose 13% to $81 billion, net FDI collapsed 96.5% to $353 million due to capital repatriation from IPOs and outward investments [4]. This duality highlights India’s balancing act: attracting greenfield investments in energy and tech while hedging against U.S. tariff risks through BRICS+ partnerships. The NDB’s multilateral guarantee mechanism, designed to reduce financing costs for climate projects, is expected to attract $15–20 billion in private capital by 2026 [1].

De-dollarization efforts, meanwhile, are reshaping India’s external accounts. By 2025, 30% of India’s oil imports were settled in local currencies, a shift that reduces exposure to U.S. sanctions and dollar volatility [1]. However, this transition carries risks: a weaker rupee could erode foreign exchange reserves, and overreliance on Chinese rare earths may complicate India’s strategic autonomy [3].

Strategic Implications for Investors

For investors, India’s BRICS+ pivot presents a paradox: high-growth opportunities in energy and manufacturing coexist with geopolitical risks. The NDB’s role in financing green projects and the BRICS Pay platform’s potential to streamline trade offer compelling long-term prospects. Yet, U.S. tariffs and the Trump administration’s “trade-as-foreign-policy” approach introduce uncertainty, particularly for export-heavy sectors [3].

Conclusion

India’s response to U.S. tariffs—deepening BRICS+ ties, accelerating de-dollarization, and pivoting to green energy—signals a strategic reorientation in global supply chains. While these moves enhance economic resilience, they also expose vulnerabilities in sectors reliant on U.S. markets. For investors, the key lies in balancing exposure to India’s high-growth sectors with hedging against geopolitical volatility. As the 2026 BRICS Energy Gathering approaches, India’s ability to navigate this complex landscape will determine its role in a multipolar world.

Source:
[1] Indian Exporters Face 50% US Tariff Rate Effective August ... [https://www.india-briefing.com/news/indian-exporters-face-50-percent-us-tariff-39458.html/]
[2] BRICS Summit Rio de Janeiro 2025: A new impetus for multipolarity? [https://www.ifimes.org/en/researches/brics-summit-rio-de-janeiro-2025-a-new-impetus-for-multipolarity/5561]
[3] Could Green Industry Unite the BRICS and Save the Planet? [https://rsaa.org.uk/blog/could-green-industry-unite-the-brics-and-save-the-planet/]
[4] India's Foreign Direct Investment Tracker 2025 [https://www.india-briefing.com/news/india-fdi-tracker-2025-38140.html/]
[5] Budget 2025-26: Milestones, Misses, and the Road Ahead for India’s Climate-Resilience Goals [https://www.orfonline.org/research/budget-2025-26-milestones-misses-and-the-road-ahead-for-india-s-climate-resilience-goals]
[6] Stock markets dive in early trade as steep 50% U.S. tariffs dent investors' sentiment [https://www.thehindu.com/business/markets/stock-markets-dive-in-early-trade-as-steep-50-us-tariffs-dent-investors-sentiment/article69983256.ece]