By Manish Maheshwari
When America sneezes, the world catches a cold. But when Donald Trump coughs up tariffs, it can set entire economies gasping for air. At a campaign event brimming with familiar rhetoric and populist zeal, the former U.S. President unveiled a sweeping new trade proposal: a universal 10% import tariff and a punishing 60% levy on Chinese goods. This time, the collateral damage may not be Chinese manufacturers or German automakers, but India’s nascent and promising AI startup ecosystem.
While Trump’s plan may be aimed at decoupling from China, its ripple effects threaten to rupture a global tech supply chain that is already stretched thin. India, which has only recently begun to assert itself as a serious contender in the AI race, now finds itself in a precarious position—exposed, underprepared, but not without recourse.
Three Key Impacts (and a Path Forward):
1. Dollar-Denominated Dependency: The Hidden Cost of Digital Imports
India’s AI startups are not merely powered by talent and ingenuity. They run—quite literally—on imported infrastructure: cloud credits from AWS and Azure, GPUs from Nvidia, AI accelerator chips from Taiwan, and open-source frameworks with licensing structures tied to the U.S. digital economy. Many of these services are billed through U.S.-based entities and priced in dollars.
If Trump’s universal tariff policy extends its reach to software APIs, cloud services, or semiconductors passing through American channels, the cost of doing business for Indian startups could surge by 20–30%. For young ventures operating on thin margins and limited runway, this could be the difference between scaling and shutting shop.
Therefore, India must fast-track its Digital Sovereignty Framework—building sovereign cloud infrastructure, reducing reliance on U.S.-based billing systems, and developing strategic chip alliances with trusted partners like Japan, Israel, and Taiwan. Without that, Indian AI will remain a castle built on someone else’s cloud.
Also read: China vows to ‘fight to the end’ as Trump threatens additional 50% tariffs
2. Capital Crunch: When Political Uncertainty Becomes Financial Risk
Venture capital is as much about geopolitics as it is about growth. With over 40% of late-stage capital in Indian startups coming from U.S.-based funds, the threat of a protectionist White House could spook investors. Tariffs on AI infrastructure, visa restrictions, or curbs on data access could make Indian startups less attractive bets, especially if their business models are interlinked with American customers or suppliers.
We’ve seen this before: during Trump’s previous term, there was a noticeable chill in cross-border funding flows to emerging markets, especially in sectors sensitive to U.S. trade and technology policies.
Therefore, India needs to broaden its capital base. A dedicated AI Growth Fund, co-sponsored by the government and India’s largest corporates, could provide insulation from U.S. capital flight. Sovereign wealth funds, pension funds, and family offices should be incentivized to back deep-tech and AI ventures.
3. Strategic Autonomy: From “Tech-Dependent” to “Tech-Confident”
Trump’s tariffs may be reactive, even reckless—but they offer India an uncomfortable gift: the chance to confront its tech dependency problem head-on.
Over the past decade, India’s digital economy has grown explosively, but its tech core remains worryingly hollow. We assemble smartphones but don’t design the chips. We process data but rely on foreign algorithms. We innovate at the edges but borrow at the center.
The tariff shock could catalyze a long-overdue pivot: from tech adoption to tech creation. India must embrace its demographic dividend, high digital penetration, and strong public digital infrastructure (like UPI and Aadhaar) to nurture homegrown AI platforms, semiconductor design capabilities, and multilingual LLMs that reflect our unique sociocultural fabric.
Therefore, India must launch a National Mission for Strategic AI Autonomy—a five-year, Rs. 50,000 crore initiative to support indigenous R&D, AI chip design, and foundational model training with government-grade compute infrastructure. This isn’t protectionism—it’s preparedness.
India has missed too many technology buses: hardware in the ’80s, operating systems in the ’90s, and social media in the 2000s. The AI bus is here—and Trump’s tariffs, ironically, may be the rude jolt that forces us to stop being passengers and start becoming drivers.
There is precedent. Japan in the 1980s responded to U.S. protectionism by doubling down on R&D and creating national champions like Sony and Toyota. South Korea did the same with Samsung and LG. China turned trade sanctions into a self-reliant tech juggernaut. India can too—but the clock is ticking.
Trump may be trying to “Make America Great Again,” but his tariffs may just force India to make itself sovereign at last—not through slogans, but through silicon, code, and capital.
If Indian policymakers hit snooze now, we’ll be chasing the next trend while importing the present one—again. And if Indian founders don’t future-proof their supply chains and capital flows, their unicorn dreams will wither at the altar of a tariff war they didn’t start, but can’t ignore.
(The author is a Fellow at Harvard University and General Partner, BAT VC. Views expressed are the author’s own and not necessarily those of financialexpress.com)