From The Diplomat, August 16:
Trump’s tariff onslaught has forced India into a precarious position, and New Delhi is employing three strategies in tandem to get out of it.
New Delhi has been blindsided by U.S. President Donald Trump’s recent tariff temper tantrums. While Indian policymakers anticipated some trade tensions with the United States during Trump’s second term, they hoped that Prime Minister Narendra Modi’s strong rapport with Trump, along with the geostrategic importance of the India-U.S. partnership, would spare them from the worst of Washington’s protectionist impulses.
Indeed, until recently, India-U.S. trade ties seemed to be heading in a positive direction. Trump and Modi agreed to increase bilateral trade to $500 billion by 2030 during their meeting in February. Earlier this summer, India and the United States seemed on the verge of clinching a trade deal.
In a dizzying reversal, on August 7, India found itself with a 25 percent tariff on most products it sells to the U.S., its largest export market. This tariff rate is set to increase by an additional 25 percent on August 27, a punishment for India’s purchases of Russian oil and gas. India also faces the looming threats of indirect tariffs, including steep tariffs on pharmaceuticals and semiconductors and a 10 percent tariff on goods from countries that are members of the “anti-American” BRICS organization.
Trump’s tariff onslaught has forced India into a precarious position, and New Delhi is employing three strategies in tandem to get out of it.
First, New Delhi is confronted with the daunting task of securing a deal with Washington, without violating any key redlines that would jeopardize Modi’s domestic support. India is also attempting to delicately manage its geoeconomic relationship with China, cooling tensions with Beijing without ignoring preexisting military and economic security concerns. While hedging between the two great powers, India is also seeking to advance its geopolitical ambitions of assuming great power status by diversifying its economy to alternative partners.
Managing Trump’s Tariff Pressures
Faced with a barrage of tariff threats, New Delhi has sought to strike a deal with Washington without compromising its key interests. India has refused to rush into an unfavorable agreement, unlike other major U.S. trading partners. While having drawn a clear redline at exposing its agriculture and dairy sectors to competition from U.S. exports, in the hopes of securing a deal, India has offered a range of limited and strategic concessions, including reducing tariffs on 55 percent of U.S. exports and increasing purchases of American defense and energy products.
Thus far, India has refrained from retaliating, aiming to avoid escalation that would jeopardize the prospect of a deal that might ease existing retaliatory tariffs and the impending 25 percent secondary tariff related to India’s purchases of Russian oil. Indian officials are reportedly exploring what concessions can be offered at negotiations with the U.S. later this month, including tariff reductions on a limited range of agricultural products, namely cheese and almonds, that would have minimal impacts on domestic producers.
While some Indian oil refiners have decreased their purchases of Russian oil, New Delhi has remained adamant that it will continue imports of Russian oil that are legally permissible under the G-7 price cap. As a clear signal of resolve and as part of a broader effort to hedge against the U.S., India has simultaneously moved to bolster its historically strong economic and defense ties with Russia.
New Delhi’s firm stance reflects domestic political pressures. Modi has touted India as an emerging great power destined to play a key role in the future geopolitical and economic order and he cannot afford to be seen as appeasing Trump’s whims. Concessions to the United States that undermine the standing of the ruling Bharatiya Janata Party (BJP) with Indian farmers, especially tenuous since the farmer protests that swept the country a few years ago, would be political suicide.
Other factors also reduce India’s incentive to rush into a deal: the legality of Trump’s tariffs is being openly challenged, and India has no guarantee that Trump would not backtrack on any deal that is reached between them.
This approach is, however, not without risks. Trump has seemingly run out of patience and has already imposed tariffs on India for its refusal to make a deal once. While negotiations have stalled, Southeast Asian economies, including Vietnam, Indonesia, and the Philippines have all secured lower tariff rates that make them more competitive in the U.S. market than India....
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