Former Reserve Bank of India governor Raghuram Rajan questioned the Modi–Trump friendship, criticising Washington for imposing steep tariffs on Indian goods while offering Pakistan lower rates, suggesting the US’s trade actions contradict the supposed warmth in ties between the two leaders.
“Where is the much-extolled friendship between US President Donald Trump and Prime Minister Narendra Modi when the US can slap a 50 per cent tariff on India but impose only 19 per cent on Pakistan?” Rajan said, speaking at an event hosted by the Chicago Council on Global Affairs on November 6.
Rajan said the move had left India “very disappointed” and showed that “the US cannot be trusted.”
“I think India was getting closer to the United States over the last 20 years and it is very disappointed. I'm not talking about leadership, I'm talking about people who get hit with this tariff. I don’t mean to rub salt in the wound – at the same time Pakistan has a tariff rate of 19 per cent, India has 50 per cent. Where is the friendship between Modi and Trump that was extolled? It's a slap in the face for Modi because the Indian opposition is asking him ‘where's your friendship?’” Rajan said.
Rajan argued that India could not be the most tariffed country in the world—“more than China”—while Washington continued to talk about “military friendship and alignments and joint manoeuvres and so on.” He said such actions tend to linger in people’s minds.
“The US cannot be trusted,” Rajan said, recalling that “in the 1970s (former US President Richard) Nixon and (former Secretary of State Henry) Kissinger tilted the US towards Pakistan in the Indo-Pak War in 1971. They sent the seventh fleet to stop the war, to help Pakistan. Indians were very miffed at that, and the Soviet Union helped India. That put India in the Soviet camp for 25 years,” he noted, adding that it took considerable time for India to move out of that alliance.
Rajan added that India may not fall back on China given the present relation between the countries.
“India doesn't have a lot of other places to go, shares a border with China, has fought one serious border war and a bunch of skirmishes with China. India is suspicious of China. It's also very worried about Chinese goods coming and swamping India. It's happy for Chinese investment but it wants to be a little careful about becoming dependent on China,” he said.
He further noted that although India maintains good ties with Japan, Australia and other Quad nations, it “wants to build a relationship with Washington” and was “left very disappointed that this has not become transactional.”
Rajan also explained how the 50 per cent tariff had uneven effects across industries.
“There are companies like Apple that can persuade the administration and get waivers, which means it might not be hugely impacted. But then there are smaller companies that are not finding it sustainable to sell their products in the US for a 50 per cent tariff,” he said.
“Those relationships once disrupted are hard to build back because somebody else has taken up the slack in Bangladesh or Vietnam and so it's something that will have costs. It's typically small and medium enterprises that will bear that cost and the longer this lasts the more it becomes a permanent rupture,” Rajan added.