Given the restricted room for manoeuvres against the restrictive trade practices so patently deployed by world’s trade major, India has little latitude in building coalition or alliances
The world is inured to US President Donald Trump’s revealed penchant to double down tariffs on allies and adversaries alike, using it as a weapon to wreak wrenching agonies to the victims dependent on its vast alluring markets! After his return to power for second term, Trump has hiked the average tariff rates from about just 3% to about 20%, because of which the US consumers will benefit less from imports, while the US exports
will also dwindle.
Even as this tariff gambit is to serve his ostentatious objective of Making America Great (MAG), unflattering upshot of the fanciful tactics and antics of Trump is already manifest with reports doing the rounds that the month-long tariff threats and tirades so recklessly held out by the free world’s so-called bastion of free trade has begun to trigger visible cracks and damage to the
US economy.
So, when he signed an executive order on August 6 slapping an additional 25% tariff on imports from India to take effect after three weeks, over and above the 25% tariff that he approved on July 31 for what he alleged India’s continued “imports of oil from Russia directly or indirectly”, India felt short-changed and singled out for the swinging levy.
New Delhi’s justification for continued oil sale to Russia that it is no patch on or match with what China and the European Union did business by trading on several items with Russia since its invasion of Ukraine did not cut ice with the cold Trump Administration. For India, it is not only the US hefty import levy that hurts the vital interests of its domestic economy’s export segments at a time when China too, swinging on a massive trade surplus as it exports more to than it imports from India, is tightening India’s indispensable supply chains such as fertilisers, Active Pharmaceutical Ingredients (API), tunnel boring machines, rare earths and its nimble-footed technical skilled personnel.
For all the bonhomie and goodwill Prime Minister Modi invested in his first two terms with the US and China in a volatile geopolitical situation have come home to roost and roast India now. This has also come about at a wrong time when the government is in the thick of building the domestic economy brick by brick to be a developed one by 2047, the centenary year of India’s Independence. Even as India has been accused of sheltering its domestic industry behind high tariff walls all along these years when most of the developed nations had cut their industrial tariffs to less than 2% under the WTO rule-based trading regime, this luxury of liberal trading milieu is no longer available now as the WTO is looked at askance by its original founder, the United States during the last couple of years.
It is germane to note a fact as conceded by Minister of State for Commerce and Industry Jitin Prasada in response to a query in Lok Sabha that post-Union Budget 2025-26, the simple average India’s industrial tariff stands at 10.66%. But the US now has its import levies zoomed to 50% for all Indian exports save a few in less than a fortnight from now! A topsy-turvey trading order the world has seldom seen in decades after the Great Depression of the late 1930s. Even otherwise, India’s trade negotiation skill is on the mat from now till August 27 when the extra duties would come into force. The implacable impact of the 50% tariff is going to jolt India’s exports worth 86.5 billion dollars as per 2024-25 trade figures, barring a clutch
of exempt items.
Caught between the hard rock and the deep azure sea, India’s position today is unenviable, as both the US and the China are exerting hard pressures to wrest the best for themselves. No doubt India has a big domestic market to cater to the insatiable demands of millions of people with rising disposable income to spare, if not splurge on things that make a qualitative difference to existence. But this calls for concerted action to free factor market production such as land and labour, besides making a redoubled bid to beef up basic education and primary health facilities on a war-footing that appears to have been abandoned both, by the Centre and the states in quest of chimerical projects and pie-in-the-sky programmes that demand colossal capital.
Given the restricted room for manoeuvres against the restrictive trade practices so patently deployed by the world’s trade major, India has little latitude in building coalition or alliances even within the bloc of BRICS (Brazil, Russia, India, China and South Africa), let alone with other developed and developing countries that had on their own entered into bilateral deals with Trump to reduce the concussion of the hefty import tariff. At best, New Delhi can help exporters for alternative overseas markets or intensify import substitution to cope with unmet internal demand that remains not fully tapped. But that is easier said than done, given the practical difficulties for the government which must perforce have to conserve scarce resources for competing demands of development!
(G Srinivasan is a senior economic journalist based in New Delhi.)
