Trump Escalates Tariff War With India

Going by U.S. President Donald Trump’s playbook, his latest tariff hit on India is not surprising. It is part of his negotiating tactics.  He goes into attack mode to get the deal that he wants, hitting countries hard and then retracting. He has done this to other countries as well. China was initially hit by a 145 percent tariff. Trump is using the same tactics with India and every other country.  

The good news is that the 50 percent tariff will not be in place immediately. There is a breathing space  of 21 days before the tariff plan  comes into effect. So there is a  three- week gap and  time for tempers to cool and get  the negotiations back on track. 

 `` This is typical Trump . The raised tariff will come into effect in 21 days. There is scope for negotiations. Let us recognize that India has unnecessarily irritated Trump in the context of Sindor ceasefire.Modi could have phoned him up and thanked for pushing Pakistan to seek a ceasefire,’’ says retired ambassador KP Fabian. 

Winner Takes All

Most countries have given in tamely to Trump’s demands. For India there are a couple of domestic compulsions that many export oriented countries of South East Asia, do not have. No political leader can compromise on agriculture which remains the mainstay for most of India’s population. Trump wants India to open up its farming sector, which is hard for any government to do as it will affect the livelihood of a large section of India’s farming community. Here the negotiations will be tricky and Trump will not be easily satisfied with a little bit of tinkering here and there.  

Russian Oil and Strategic Autonomy

The issue of buying discounted Russian oil is tied to India’s strategic autonomy and Prime Minister Narendra Modi, celebrated by his supporters for his strong leadership, cannot be seen to be buckling under US pressure. So it is unlikely that Modi will immediately  stop importing Russian oil. 

The Ministry of External Affairs (MEA), reacting to the latest tariff salvo by Trump has repeated what it said two days ago.``We reiterate that these actions are unfair, unjustified and unreasonable… India will take all actions necessary to protect its national interests.’’  The statement again   

 ``We have already made clear our position on these issues, including the fact that our imports are based on market factors and done with the overall objective of ensuring the energy security of 1.4 billion people of India,’’ and went on to point to the double standards of the US Administration: ``It is therefore extremely unfortunate that the US should choose to impose additional tariffs on India for actions that several other countries are also taking in their own national interest.’’ Until the broad framework of a bilateral agreement goes through, it will be a tough few months for India-US relations as well as the Indian economy.  

Escalating matters before a deal is done is part of Trump’s way of getting a good business agreement going. So after slapping India with 25 percent tariff from August 1, he has now signed an executive order to punish New Delhi’s purchase of Russian oil by slapping  25 percent penalty  on Indian goods entering the American market. This together with the earlier announcement of 25 percent is  taking the overall tariff for New Delhi to a whopping 50 percent. India now faces the double blow of trade restrictions and geopolitical pressure over its strategic autonomy. 

India-US ties 

How will the tariff war let loose by the US President affect overall India-US ties that has grown tremendously since 2000? Both sides had invested time and energy on making former Cold War warriors shed much of their previous suspicion and distrust of each other. 

Some of this was clearly back during the four day Operation Sindoor. Trump’s overtures to Pakistan has not pleased many in India. 

“The US- India partnership is strong enough, and has witnessed enough upheaval, to get through what is currently happening. If the two countries could work with each other during and after the Cold War they can do so even now. Things should calm down on the tariff and trade front once the next round of negotiations take place towards the end of the month. And it is to be hoped that US overtures towards Pakistan and fractious tariff negotiations will not damage the bedrock of trust between the two countries that took over three decades to buil,.”  says Aparna Pande, of the Washington-based Hudson Institute. 

Prime Minister Narendra Modi is scheduled to visit Tianjin, China, to attend the Shanghai Cooperation Organisation (SCO) summit from August 31 to September 1. This will also be his first visit to China since the Galwan Valley clash in 2020. His last visit to China was in 2019. 

Before attending the SCO summit, PM Modi is scheduled to visit Japan on August 30, where he will participate in the annual India-Japan Summit with Japanese Prime Minister Fumio Kishida. From there, he will head to China, according to sources.