Among the major economies, the most calm and dignified response to the slew of tariffs announced by US President Donald Trump was that by India—unlike so many other countries, who issued very different responses. The most unrestrained was that by China, which not just imposed additional tariffs on several US imports, but placed several US companies on the Entities List, presumably for having supplied defence equipment to Taiwan. Given that relations between Washington and Beijing were anything but cordial, such a reaction was undiplomatic, to put it mildly. The EU responded by criticising the tariffs and said it would place additional tariffs on some imports from the US soon. Even usually low key Japan gave a note of criticism. The reality is that both the US and countries such as India, Japan, South Korea and Australia are dependent on each other for security, and hence there are limits beyond which relationships should not be upended by extraneous considerations. President Trump needs to consult with his national security team, besides the US Trade Representative while working out what he has called “reciprocal” tariffs. In fact, the tariffs imposed have little to do with reciprocity. The trade surplus of every country affected has been subject to additional calculation in a manner that the USTR believes will remove the surplus. President Trump got fixated on tariffs nearly four decades ago, and while the world has changed during these years, his tariff fixation has not.
Where the opposition to the Trump tariffs is concerned, several of the countries unhappy with the additional tariffs imposed on them say that levying such tariffs would mark the end of the process of “globalisation”, which they claim has benefitted the world. In reality, globalisation in practice has benefitted most only a few of the more advanced countries. Labour flows from India, for example, have been kept almost entirely away from the promised “free trade”. In the case of India, even several services have in effect been excluded from import. All such exclusion has harmed the interests of the countries making them, as labour shortages have cropped up in them, which have in effect been filled with illegal migration from conflict locations. Such migrants lack the skill sets of the Indian side. Refusing to admit legal migration has led to inflows of illicit migrants, several of whom are subsequently unable to adjust to the culture and lifestyles of the countries they have entered, and consequently cause social problems. Countries in the EU have been the worst sufferers of the misguided policies of the Brussels bureaucracy regarding migration, especially from India and are paying a heavy price for it. Migrants from India generally have low levels of crime and begin contributing to the tax system soon after they get to work. President Trump needs to integrate into his calculus of tariffs the need to distinguish friend from foe, and tariffs that have less or no blowback. Tariffs having substantial blowback on the US economy itself, including on inflation, need to be kept aside. Recent polling trends have not been encouraging for the Republican Party. As far as India is concerned, the response to the 27% tariffs imposed on some imports from India has been calm. Almost no countermeasures have been announced. Such is the best way forward where overall relations with the US are concerned. The Trump tariffs should not be such as to be beneficial to the countries hostile to the US and indeed India, and friends need to be treated with care. The reaction of India could serve as an example for other countries friendly to the US to follow. Clearly, the Trump tariff matrix is a work in progress, and being the practical businessperson he is, it is clear that President Trump will soon move away from just the narrow view of the USTR but on an overall perspective of US national interests. Such is precisely what India has done.
MDN
