The US-India tariff war reminds me of the famous saying attributed to former US secretary of state Henry Kissenger which goes: “It may be dangerous to be America’s enemy, but to be America’s friend is fatal”.
They say there is no permanent friend or foe in international relations. Today’s sworn enemy may become a bossom friend tomorrow and vice versa in a blink of an eye. This we saw happening with the US-India friendship and strategic partnership when it received a stunning blow after Trump took an unexpected decision to impose a staggering 50 per cent tariff on India with far-reaching financial implications not only for India’s economy but also severely impacting it’s international image with 50% tag.
This makes one thing abundantly clear that international relations are deeply driven by national interests, and that how transient and fragile strategic ties between two sovereign countries could be when it comes to rapidly changing geoplotical and geostrategic interests serving as a pivot and falcrum for bilateral relations between two nations.
President Trump’s 50% tariff imposed on India, although has come as a shellshcok for India, yet the Indian leadership doesn’t appear to be unnerved because they are well aware of Trump’s way of doing business with partners. Trump is known for his unpredictability and that he can take a huge somersault any time leaving everyone with the jaw dropped. He may offer an olive branch to India anytime to mend fences as he can’t afford a strained relationship with India for long given the fact that India is a huge global economy to be reckoned with and that it can’t be brushed aside so easily. The tariff drama is being staged only to coerce India into submission and pressure it to accept Trump’s demands
India is currently walking a tightrope as one more mistake and its economy will hit rockbottom, and the only way left is a well-calculated and measured response on the part of India to tackle the formidable challenges it’s facing and to recover from the setback. For that India will have to make compromises of biblical magnitude that may further hit the already bruised image it suffered as a result of the recent 4-day conflict with Pakistan that has shattered its long-cherished dream of becoming a regional hegemon.
As for the impact of Trump’s 50% tariff imposed on India, leading economists and analysts have divided opinions. Quite a few of them foresee a crippling impact on India’s economy. They are of the view that the tariff targets some of the key sectors of India’s economy like textile, steel, gem, chemicals, pharmaceutical, leather and jewelry sectors reckoned as the backbone of India’s economy. They believe that it wiil paralyze India’s economy because the tariffs have placed around 80 billion dollar Indian export to the US under severe threat. The 50% tarrif slap imposed on India with 25% tariff coming into force immediately and the extra 25% tariff to take effect after 21 days of the presidential executive order issued in this regard, has placed India at a huge disadvantage vis-a-vis its neighbours, particularly its arch-nemesis, i.e. Pakistan. The economic experts are of the view that the tariff will adversely impinge upon the competitiveness of the above-mentioned sectors in the international market.
The rationale behind giving a grace period of 21 days for the extra 25% tariff to come into force is to give time to India to come to negotiating table and also to induce her to move away from Russia and abandon the purchase of Russian oil which is the chief irritant and main reason behind the 50% tariff. The issue doesn’t end here as Trump has warned India that it could face more tariffs if it declines to restrain itself from purchasing Russian oil.
A few other economic experts, however, believe that the tariff game will not make a material difference given India’s highly diversified economy and huge trade volume with major world economies. They are of the opinion that although the 50% tariff sounds a staggering percentage, yet it makes only 20-25% of the total trade with the US; hence, it may not make a huge dent in India’s diversified and highly reselient economy. Both the countries have around 250 billion dollar annual trade which they want to take upto 500 billion dollars within next 5 years. These analysts downplay the impact of 50% tariff on India’s economy.
The tariff war between the US and India is likely to assume an ugly shape in the coming few days with both sides dug their heels in deep with no signs of appeasement, and determined to stick to their guns. For President Trump it’s well-nigh impossible to rescind his decision and for Mr Modi it’s difficult to submit to Trump’s demand and abandon purchase of Russian oil being crucial for India’s economy. It’s not only oil that India purchases from Russia, but the entire defence equipment including fighter jets, air defence system and other war paraphernalia are also being procured by Russia. So, the tariff war is likely to persist with no solution in sight anytime soon as both sides are not ready to go halfway.
