'Tariff Pe Tariff': Trump 2.0 and US-India Trade - Left, Right, and Centre Economy

With a protectionist Donald Trump in the Oval Office threatening US’ trade partners with reciprocal tariffs the trade relationship between the United States and India is undergoing a hencebefore unknown evolution.

This month, Trump announced a plan to impose tariffs that would match the rates charged by other countries on U.S. imports, a move aimed at addressing perceived trade imbalances and ensuring fairness in trade relations. This announcement came just hours before a scheduled meeting with Prime Minister Narendra Modi, during which both leaders discussed various issues, including trade, defence, and energy cooperation. Trump has previously also criticised India’s high tariff rates, labelling India a “tariff king”, and has expressed a desire for India to lower its tariffs on U.S. goods.

The U.S. currently faces a significant trade deficit with India, which Modi aims to address by increasing imports of U.S. oil and gas, as well as military hardware. The discussions between the two leaders also included plans to negotiate a bilateral trade agreement, with a target of doubling bilateral trade to $500 billion by 2030. As both nations navigate these complex trade dynamics, the implications of Trump’s reciprocal tariffs could significantly impact key sectors of the Indian economy, while also shaping the future of U.S.-India relations.

Jargon

reciprocal tariffs: A trade policy where a country imposes tariffs on imports that match the tariffs imposed by its trading partners on its exports. This aims to create a level playing field in international trade.
trade deficit: The amount by which a country’s imports exceed its exports. A trade deficit can indicate an imbalance in trade relationships, often leading to calls for tariff adjustments.
tariff king: A term used by Trump to describe countries, like India, that impose high tariffs on US goods, making it difficult for American products to compete in those markets.
Most Favored Nation (MFN) tariff: A trade status that ensures a country receives the lowest tariff rates available to any trading partner. This is a principle of non-discrimination in international trade.
non-tariff barriers: Regulatory or policy measures other than tariffs that countries use to control the amount of trade across their borders, such as quotas, import licenses, and standards.

Viewpoints 💭

‘Left’ Viewpoint

Ideological Differences

‘Right’ Viewpoint

The left views Trump’s reciprocal tariffs as a protectionist measure that could exacerbate global trade tensions and harm developing economies like India.
They argue that these tariffs challenge existing WTO agreements and could lead to retaliatory measures, impacting global economic stability.
The left emphasises the need for multilateral trade agreements and cooperation rather than unilateral tariff impositions.
They highlight the potential negative impact on Indian industries, such as textiles and pharmaceuticals, which could face increased competition and reduced market access.
The left advocates for reducing trade barriers through diplomatic negotiations and emphasises the importance of maintaining a balanced trade relationship with the US.

The left criticises Trump’s tariffs as protectionist and potentially harmful to global trade, while the American right views them as a necessary measure to address trade imbalances and protect American interests.
While the left emphasises multilateral cooperation and diplomatic negotiations to reduce trade barriers, the American right supports unilateral actions like reciprocal tariffs to pressure countries into fairer trade practices.
The left is concerned about the impact of tariffs on developing economies and global economic stability, whereas the American right focuses on the benefits of increased US exports and domestic job creation.
The left highlights the potential negative effects on Indian industries and advocates for maintaining balanced trade relations, while the American right argues that India’s high tariffs justify reciprocal measures to level the playing field.
The left views the tariffs as a challenge to existing international trade agreements, while the American right sees them as a tool to encourage foreign investment and economic growth in the US.

The American right supports Trump’s reciprocal tariffs as a necessary step to address trade imbalances and ensure fair treatment for American exports.
They argue that India’s high tariffs on US goods justify the need for reciprocal measures to create a level playing field.
The right views these tariffs as a tool to pressure countries like India to lower their trade barriers and increase imports of US goods.
They emphasise the potential benefits of increased US exports to India, particularly in sectors like defence and energy.
The American right believes that reciprocal tariffs will encourage foreign companies to establish operations in the US, boosting domestic job creation and economic growth.

Prominent Voices 📣

From the ‘Left’

From the ‘Right’

Ajay Srivastava (Founder of Global Trade Research Initiative): Warned against the timing of free trade agreements with the US and suggested the need for clear criteria for imposing tariffs. ¹
Biswajit Dhar (International Trade Expert): Stressed the need for caution in trade negotiations, noting the potential impact of reciprocal tariffs on Indian exporters. ²
Chetan Ahya (Morgan Stanley Analyst): Predicted potential tariff hikes for India and suggested opportunities for India to increase purchases of U.S. goods to mitigate trade tensions. ³
Madhavi Arora (Economist at Emkay Global): Emphasised that India’s high tariffs on US imports could lead to disproportionate impacts if reciprocal tariffs are imposed. ¹
Maeva Cousin (Bloomberg Economist): Noted India’s significant tariff differential with the U.S., making it susceptible to retaliatory measures. ³

Sonal Varma (Nomura Analyst): Highlighted the risk to emerging Asian economies, including India, due to their higher tariff rates on U.S. exports. ³

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Donald Trump (President of the United States): Emphasised the need for fair trade practices and justified the tariffs as a measure to protect American industries. ⁴ ⁵
Narendra Modi (Prime Minister of India): Expressed optimism about strengthening US-India trade ties despite the challenges posed by the new tariffs. ⁴ ⁶
Nirmala Sitharaman (Finance Minister of India): Clarified that India’s tariff reductions are part of a strategy to strengthen the Indian economy and promote self-reliance. ⁷
Vikram Misri (Foreign Secretary of India): Highlighted the potential for a bilateral trading agreement as a positive development and emphasised ongoing dialogue between India and the U.S. ⁸ ⁹
Peter Navarro (Trump trade adviser): Criticised major exporting nations for imposing punishing tariffs and non-tariff barriers. ¹⁰ ¹¹

Karoline Leavitt (White House Press Secretary): Emphasised Trump’s belief in the fairness of reciprocal tariffs and their potential benefits for American workers and national security. ¹² ¹¹
Kevin Hassett (National Economic Council Director, USA): Pointed out that India has high tariffs that restrict US imports, aligning with Trump’s criticism of India as a significant trade abuser. ¹¹
Richard Rossow (Head of the India program at the Center for Strategic and International Studies): Describes the tariff discussions as a challenging negotiation, likening it to a ‘boxing match.’ ¹³