Editorial: Tariff tensions

The Modi-Trump meeting is an opportunity for both countries to pursue a pragmatic approach towards trade

The tensions surrounding tariffs and immigration are set to dominate the agenda of bilateral meetings between the visiting Prime Minister Narendra Modi and the United States President Donald Trump whose recent actions have triggered jitters among his friends and foes alike. While the two leaders have often described each other as good friends in the past and even held joint political rallies together, the meeting comes at a time when the relationship is being tested by Trump’s tariff threats and deportation realities. India needs to do some hard bargaining as Trump, despite all his public posturing and rhetoric, comes across as a transactional President. He recently issued orders levying 25% tariffs on all steel and aluminium imports without exception and spoke about “reciprocal tariffs”. India is certainly on the tariff radar of the Trump administration, though he has so far refrained from specifically targeting India. It is entirely possible that Trump will use the threat of imposing tariffs as a negotiating tool. The US is India’s largest export destination and ranks among its top two trade partners in several sectors, including technology, defence and energy. The two-way trade between the US and India touched an all-time high of $118 billion in 2023-24. Despite the deepening strategic relationship between the two countries and the convergence of strategies to counter China, Trump had, during his recent presidential campaign, labelled India a “very big abuser” of trade.

Since being elected for the second term, Trump pushed New Delhi to buy more US-made security equipment as a way to reduce the imbalance in their trade. In 2024, the trade surplus stood at $45.6 billion, in favour of India, according to US government data. On its part, India has sent the right signals by lowering tariffs on certain items that would benefit American exporters. Traditionally, India, an emerging economy, has had high tariffs in place for several imported products that it feared could hurt its domestic industry and farm sector. However, in its latest Budget, it slashed tariffs and avoided any protectionist announcements. Such steps might pre-empt harsh action by the US administration. The Modi-Trump meeting provides an opportunity for both countries to pursue a pragmatic approach towards trade issues. As External Affairs Minister S Jaishankar put it, the test that Trump 2.0 gives to Indian diplomacy is quite “out of syllabus”. There is a sense of unpredictability and volatility about him. For a quarter of a century, the Indo-US relationship has been on a continuous upward curve. The two nations have found ways to overcome long-standing disputes, including those over Pakistan and nuclear non-proliferation. However, Trump represents a new, aggressive and protectionist brand of politics that needs to be handled with deftness and pragmatism. The challenge lies in striking a balance — offering enough to keep trade relations steady without compromising domestic economic interests.

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