Building trust, saving trade
India, April 21 -- India and the US resumed in-person trade negotiations in Washington D.C. on Monday after nearly four months. It has been just over a year since US President Donald Trump delivered a huge shock to the global trading order when he announced his reciprocal tariffs last April. Trade policy has had a tumultuous ride in the US since then. Trump invoked emergency powers to implement these tariffs, but the US Supreme Court deemed the action unjustified. A legislative route to tariffs might not be as easy for Trump. The domestic environment in the US has become even murkier with Trump's decision to launch a war in West Asia. Things will continue to be extremely volatile until the US midterm polls in November.
Indo-US trade relations have had an even bumpier ride in this period, thanks to Trump unfairly singling out India for importing Russian crude and imposing 25% additional tariffs, bringing the overall tariff to 50%. Just after India secured a trade deal with the US to reduce tariffs to 18% - a deal requiring India to make large in-principle commitments to increase US imports and allow greater market access in many sensitive sectors - the US Supreme Court scrapped the Trump tariffs.
What should be India's approach to the trade talks in this environment? Three guiding principles can be flagged here. India should not be seen as having made the earlier commitments in bad faith. That would reduce its credibility. In fact, it should use the negotiations to flag US actions such as launching trade investigations against India, which seem to be a knee-jerk reaction to the judicial upset regarding Trump's trade policies. What it should ask for is lower tariffs than what the US offered earlier, given the Supreme Court ruling and the concessions India is offering to the US in the trade deal. The guiding objective should be to take things as close to status quo ante as possible for Indian exporters to the US.
India should also strongly argue that the US stop erratic behaviour, such as allowing and then disallowing energy imports from countries like Russia or Iran. The world is currently negotiating its largest-ever energy shock thanks to a war that was started by the US. The least the US can do for its trading partners is not make things even worse....
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