New Delhi, Feb. 3 -- India is preparing an action plan to steer clear of a potential trade war with the US, two people aware of the matter said. The development comes in the backdrop of a tariff war erupting between the US and Mexico, Canada and China, with tariffs and retaliatory tariffs being traded blow for blow.

On Saturday, US president Donald Trump imposed 25% tariff on imports from Mexico and Canada (energy products from Canada would attract 10% tariff), and 10% tariff on imports from China. In retaliation, Mexico and Canada swiftly counter-imposed an identical 25% tariff on imports from the US the same day.

The Indian government is expected to unveil a full-fledged response plan in the coming months depending on the decisions of...