Trump's Tariff Onslaught: Where Does India Stand Now?

The sledgehammer blow of US President Donald Trump's imposition of a 25% tariff on Indian goods in end-July, and another 25% (announced on August 7, to be operational from August 28) on account of India buying oil from Russia at a cheap price and fuelling the Russian war machine against Ukraine, has shattered Prime Minister Narendra Modi's self-aggrandised status as a global leader commanding respect across the world.

Many countries including China, without meekly submitting to the high tariffs Trump imposed on them, successfully negotiated with him and got a better deal, and even a latest 90-day reprieve. The Modi regime instead nominally criticised the tariffs as “unfortunate”, and as a result the Indian economy is poised to face a grave crisis.

Additionally, it has considerably weakened trust between India and the US and jeopardised their carefully cultivated and flourishing two decades-old bilateral economic and strategic cooperation.

India, a victim of discrimination

The US targeting India while ignoring its own imports from Russia – among others, of uranium hexafluoride for its nuclear industry – and the EU's CNG imports as well as a huge trade volume worth $67.5 billion with Russia, is outright discriminatory. It is all the more so because India has been importing Russian oil since 2022 at the US's nudge to stabilise global prices and meet its mounting energy requirements.

Such unfair treatment to India is reflective of the doctrine of differential rights followed by European colonial rulers, who had one set of rights for themselves and another inferior set for the countries they colonised.

India being subjected to such differential standards in the 21st century negates its sovereign choice of fostering trade and commercial relations with countries of its choosing. Moscow has underlined the right of every country to take its own sovereign decisions.

Further, Trump’s threat to US companies not to do business with India, ostensibly to promote manufacturing and jobs in the US, is violative of international trade rules recurrently flouted by him in a calculated manner to hit India.

India’s quest for a position of strength

Against this backdrop, national security adviser Ajit Doval’s meeting his Russian counterpart General Sergei Shoigu and President Vladimir Putin in Moscow assumes significance. Combined with it is the scheduled visit of external affairs minister S. Jaishankar to Moscow in connection with Putin’s visit to India.

The flurry of visits is seen as India’s diplomatic move to position itself closely with Russia to deflect Trump’s tariff war in defiance of WTO rules and to secure its position in a rapidly changing global order badly disturbed by Trump. Putin’s assurances of support to India and the telephonic conversation he had with Modi augurs well for our country to deal with the crisis caused by Trump’s disproportionate tariffs.

Trump-Putin meeting

Trump's much talked about meeting with Putin in Alaska on August 15 to put an end to the continuing war with Ukraine proved inconclusive, ending without a ceasefire deal.

Besides, the EU’s demand of including Ukraine in the talks is still uncertain, while President Volodymyr Zelenskyy’s stout refusal to part with its eastern territories in exchange for peace has led to a stalemate situation.

Thus, India is still in an unstable position in relation to Trump’s continued accusations regarding its lifting of oil from Russia, and a deterioration of the situation in Ukraine could lead to a further hardening of the US’s stance.

Trump tariffs and global crisis

Given Trump's unpredictability, observers believe that his rants will become diluted after a while and it will be back to 25% tariffs for India.

Trump invoked the International Emergency Economic Powers Act – a Cold War-era law – in defence of the tariffs he imposed and warned the courts not to undermine the Act, which corresponds to the Smoot Hawley Act of 1929. President Herbert Hoover had then employed it to levy high tariffs, which had worsened the Great Depression of the 1930s.

In the present circumstances, Trump’s punitive tariffs penalising the whole world in his pursuit of the illusive MAGA (Make America Great Again) when there is no financial emergency could lead to a similar situation if the affected countries retaliate against the US government.

Washington's tilt toward Islamabad

India is placed in a precarious situation. Modi indicated that he would not cross the redline to open up the agriculture, dairy and fisheries sectors, and even expressed his readiness to pay “a heavy price” in the national interest while protecting agriculture and dairy farmers and fisher- folk.

Why is Trump so peeved with India? He has claimed on over 40 occasions that he brokered the ceasefire between India and Pakistan on May 10, which India has denied, instead holding to its stated position of no third-party mediation in bilateral matters with Pakistan while reiterating that the hostilities ended following a conversation between the Pakistani director general of military operations with his Indian counterpart.

While Pakistan acknowledged Trump’s claim and even nominated him for the Nobel Peace Prize, India denied the claims. Trump, often lured by blandishments, seemed to be deeply offended by Modi, whom he had earlier held as a “great friend”.

Also read: India-US Ties Have Been Severely Undermined After Halt in Trade Negotiations

The lunch invitation to Pakistani army chief Field Marshal Asim Munir in June to the White House, and an agreement signed for the supply of critical minerals of Pakistan to the US and the joint exploration of oil in Balochistan, underlined Trump's decisive tilt towards Pakistan.

Munir’s successive second visit to the US on August 10 to attend the farewell ceremony of General Michael Kurilla, the CENTCOM commander who had earlier described Pakistan as a “phenomenal partner” in counter-terrorism operations, as well as his meetings with the top military and political leaders and defence chiefs from several countries, further cemented the US’s ties with Pakistan.

Munir’s address to the Pakistani diaspora at Tampa, where he conjured up a nuclear attack, was dismissed by India as “nuclear sabre-rattling” indicating a nexus between the Pakistani military command and terrorist groups.

In all this, India may have failed to gauge China’s close military nexus with Pakistan, which emboldened the latter to give a decisive fight to the Indian Air Force and be a “peer competitor” of India in the US’s eyes.

Options for India

Surrounded by a belligerent China, a hostile Pakistan and an unfriendly neighbourhood, India is in an unenviable position, facing debilitating tariff rates which Trump has viewed as a national security imperative.

The Quad Summit coming up in India and the Shanghai Cooperation Organisation summit in China will further test India’s acumen against the backdrop of the recently concluded “anti-American” BRICS summit in Rio.

M.K. Venu in his article in The Wire persuasively argues that Modi has two options: one is to take an uncompromising stand not to open sectors like agriculture and dairy, and the other is to do a mid-way compromise deal with the US and sensitise people to the pros and cons of both policy options.

India's attempts to further deepen relations with Russia and come close to China have been disapprovingly noted by White House trade adviser Peter Navarro, who sharply said that if India wants to be treated as a strategic partner of the US, then “it needs to start acting like one”.

India’s vulnerability in this critical situation has been ascribed to the leadership’s weak projection of India’s inherent strengths as well as its failure of soft power policy. It is a truism that domestic policies chart the course of a nation’s foreign policy. If that be so, the prescription that India put its house in order becomes more pronounced now than ever before.

Malay Mishra is a retired diplomat and foreign policy analyst.

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