The global trade landscape continues its fascinating, albeit often turbulent, evolution. Recently, Donald Trump commented that India-US trade talks are "going good," while reiterating claims about India's purchases of Russian oil. This news, as reported by outlets like NBC News, instantly took me back to my earlier reflections on the nature of trade wars and the concept of a "level playing field" in the international arena, something I touched upon in my blog post, A #TradeWar Epidemic? from 2018. It seems some challenges are perennial, merely shifting in their specifics.
India-US Trade: A Complex Tapestry
When Donald Trump speaks of trade talks "going good" with India, it's a statement that needs careful dissection, especially given the backdrop of his administration's broad tariff policies. The Wikipedia article, Tariffs in the second Trump administration, details how the US imposed a 25% "secondary tariff" on Indian goods, starting August 27, 2025, explicitly penalizing India for its purchases of Russian oil. This move, a unilateral decision, contradicts any notion of smooth sailing.
I recall Prime Minister Narendra Modi (n.modi@india.gov.in)'s efforts in February 2025 to negotiate reduced tariffs and double bilateral trade with the US to $500 billion by 2030. India had even offered concessions, lowering tariffs on motorcycles and whiskey and pledging to review others. Yet, despite these efforts, we see the imposition of significant tariffs, with India's trade-weighted average tariff already at 12% compared to the US's 2.2%. Donald Trump has consistently labeled India a "tariff king" and a "big abuser" of trade ties.
Many voices, including journalist Fareed Zakaria and former U.S. Ambassador to India Kenneth I. Juster (kjuster@cdpq.com), have been critical of Donald Trump’s steep tariffs on India. Fareed Zakaria, in an opinion piece, called it a "major setback in U.S.-India relations," noting the reversal of decades of bipartisan progress. Kenneth I. Juster (kjuster@cdpq.com) highlighted India's indignation, especially following Donald Trump's claim of mediating an India-Pakistan ceasefire, which New Delhi rejected. He warned of increased costs for U.S. consumers due to these tariffs, which affect 20% of Indian exports. Nikki Haley also cautioned that weakening ties with India would undermine efforts to counter China. John Bolton, too, found these measures inappropriate, questioning why similar actions weren't taken against China, Turkey, or Pakistan. Economist Jeffrey Sachs (sachs@columbia.edu) went further, calling the tariffs on Indian goods a "Stupidest Tactical Move," warning of harm to U.S. interests and a push for India closer to the BRICS bloc. Indian Trade Minister Piyush Goyal (p.goyal@india.gov.in), whom I've engaged with previously on trade strategies, has affirmed India's resolve, stating that India would not "bow down" to the United States and would instead focus on expanding into new markets.
The Broader Tariff Landscape: A Predictable Pattern
This isn't an isolated incident. Donald Trump's approach to trade during his second term has been characterized by sweeping tariffs, often justified under national emergency declarations. From steel and aluminum to automobiles, pharmaceuticals, and semiconductors, the aim, according to his administration, is to promote domestic manufacturing, protect national security, and substitute for income taxes. However, economists like those from the Tax Foundation have deemed the idea of replacing income taxes with tariff revenue as "mathematically impossible." Even Nobel Prize-winning economists, including Paul Krugman and Joseph Stiglitz, have voiced strong criticisms. Paul Krugman, for instance, described Donald Trump's tariff on Brazilian goods as "evil and megalomaniacal," suggesting political motives, while Joseph Stiglitz praised Brazilian President Luiz Inácio Lula da Silva for standing up to what he called Donald Trump's "bullying."
We've seen how various nations have reacted. Canadian Prime Minister Mark Carney and Mexican President Claudia Sheinbaum have had to navigate increased tariffs, with Canada even alleging that tariffs were intended to pressure its annexation into the United States. The European Union, led by President Ursula von der Leyen (ec-president-vdl@ec.europa.eu), and French President Emmanuel Macron (macron.emmanuel@elysee.fr), have engaged in complex negotiations, with Poland's Prime Minister Donald Tusk warning against a "stupid tariff war." UK Chancellor Rachel Reeves faced pressure to adjust the Digital Services Tax, and British Prime Minister Keir Starmer has been under immense pressure to secure favorable trade terms. Even countries like Australia, under Prime Minister Anthony Albanese (a.albanese.mp@aph.gov.au), and Fiji, led by Prime Minister Sitiveni Rabuka and Minister for Trade Manoa Kamikamica, along with Acting Prime Minister Biman Prasad, have found themselves negotiating against tariff impositions, often opting not to retaliate.
My past writings, particularly WTO cannot provide a Level Playing Field, highlighted that in a trade war, the WTO's ability to mandate a level playing field is limited. I advocated then, as I do now, for India to transform itself into a "LOW-COST ECONOMY" – one that can compete globally on quality, price, and delivery. This requires fundamental reforms across manpower, materials, money, space, management, compliance, and even combating corruption and non-governance. I've sent numerous suggestions to our policymakers over the years, many of which can be found in my blog posts such as Agenda for Reforms and Level-Playing Field is a Double Edged Sword!.
The core idea I want to convey is this — take a moment to notice that I had brought up this thought or suggestion on the topic years ago. I had already predicted this outcome or challenge, and I had even proposed a solution at the time. Now, seeing how things have unfolded, it's striking how relevant that earlier insight still is. Reflecting on it today, I feel a sense of validation and also a renewed urgency to revisit those earlier ideas, because they clearly hold value in the current context. My recent suggestions to Shri Piyush Goyalji (p.goyal@india.gov.in) regarding a dual scrapping strategy at Alang, for instance, are directly aimed at leveraging India's cost advantage to secure favorable trade agreements and reduce import dependency, turning challenges into opportunities for growth. These conversations become even more critical when nations, including the US, are increasingly wielding tariffs as geopolitical tools.
Regards,
Hemen Parekh
Of course, if you wish, you can debate this topic with my Virtual Avatar at : hemenparekh.ai
No comments:
Post a Comment