Doing business with Trump

The US has now shut down a tariff-free route for around 2,000 kinds of products that India exports to America. US President Donald Trump has sent a loud and clear message to New Delhi: India cannot hope that business will run as usual. China and Mexico were slapped with punitive tariffs for not agreeing to US demands on market access. Analysts feel he will not spare the Europeans either. With the US presidential elections coming next year, Trump seems to be in a hurry to rewrite trade rules to brighten up his image.

The Trump administration’s consistent message is that New Delhi should address Washington’s trade concerns despite India’s status as a quasi-ally of the US in its trade war with China. Indian officials are used to giving some concessions to western demands for market access while trying to build tariff walls to protect Indian manufacturers. When Trump complained that India was imposing high taxes on Harley Davidson motorcycles, India tried to mollify him by cutting tariffs to 50 per cent. Trump bitterly complained about how his India continued to impose high taxes on Harley imports, while the US did not tax Indian motorcycles at all.

Trump’s move can be met by either retaliation or by a rethink on India’s policy. Retaliation however would be difficult if not impossible given the fact that the US is India’s largest export destination. India can argue that it has to be given some concessions as the US just stopped the waiver of sanctions for countries importing oil from Iran. But such arguments had better traction with the previous Obama administration and not so much with Trump’s. Possibly, the need of the hour is smart thinking. India has to open up its market far wider to address America’s concerns and the design for such tariff cuts can be tailored so that goods meant for the rich are allowed in with greater ease thus opening up a small but rich market, while the far larger mass market remains protected by tariff and quality control measures.