Calling India a ‘tariff king’, Donald Trump had put a squeeze on India’s exports to the US, unmoved by the attention he was getting from the Modi government. In fact, Trump’s role in the deterioration of Indo-US economic relations in recent years has rarely got the attention it deserves. This is despite the fact that Trump, a businessman, was expected to herald a new dawn. With the collapse in economic growth owing to the Covid-19 pandemic both in India and the US, supportive economic ties could have salvaged the situation to some extent.
Last year, when Trump and Modi walked hand in hand into a Houston stadium for the Howdy Modi event, the US had just raised tariffs on 14 per cent of Indian exports, including steel, aluminium, textiles and jewellery. New Delhi retaliated thereafter by making California almonds and Washington apples costlier. There was talk of a mini-trade deal and despite Trump’s claim of ‘tremendous progress’, there is no outcome till now.
On the contrary, the Trump administration queered the situation by relentlessly raising tariffs on Indian goods, altering visa terms for software engineers working in that country and raising concerns over medical device price caps as well as digital economy issues. The biggest area of friction has been trade and tariffs. In an increasingly protectionist era, both governments have become trigger-happy in terms of import duties.
The battle began with the US President deciding to focus on countries with which it had a high trade deficit. India was ranked 10th on the list of such entities in 2016 with a $24.3 billion deficit coming down to $23.3 billion in 2019. Negotiations on this issue had been continuing for quite some time with India trying to buy more by importing American crude oil and LNG. However, the scenario turned murky last year with Washington’s sudden decision to drop this country from the group of developing economies entitled to duty free import tariffs. Known as the Generalised System of Preferences (GSP), the scheme launched in 1975 enables duty free import of goods into the US by developing countries.