Finally, PM Modi finds the courage to stand up to Donald Trump’s bullying tactics

But India’s action will impact imports worth only $241 million - a smidgen compared with its total imports from the US

  • Published 19.06.19, 9:36 AM
  • Updated 19.06.19, 9:38 AM
  • 2 mins read
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Last summer, when the US first decided to raise tariffs on aluminium and steel product imports from India, China, South Korea and a few other nations, the Narendra Modi government chose not to retaliate in the hope that the trade tensions would de-escalate (AP photo)

The prime minister, Narendra Modi, has the wind in his sails after a massive electoral verdict. For over a year, the government led by Mr Modi held its fire in the face of extremely provocative statements by the president of the United States of America, Donald Trump. Mr Trump has been threatening to slap punitive tariffs on goods imported from India if New Delhi fails to adopt measures to improve market access for American products. Last week, however, Mr Modi hit back at the US for terminating duty-free imports of 1,784 items from India under the Generalized System of Preferences by imposing retaliatory tariffs on 28 American products, ranging from apples, almonds and walnuts to certain chemicals and finished metal products. India’s action is not really a big deal: it will impact imports of US goods worth only $241 million. This is just a smidgen when compared with the $33.1 billion worth of goods that India imported from the US in 2018. But the big surprise was that Mr Modi had finally found the courage to stand up to Mr Trump’s bullying tactics.

The big beef that Mr Trump has with India is over the size of the US deficit in merchandise goods trade that swelled to $21.3 billion in 2018. According to the Office of the US Trade Representative, India is the US’s ninth largest trading partner in goods with overall trade in the goods between the two countries put at $87.5 billion. Of this, India’s exports account for the lion’s share at $54.4 billion. Tariffs have proven to be Mr Trump’s cat-o’-nine-tails that he has waved menacingly at world leaders to force them to roll back what the US perceives to be unfair trading practices and bring about a semblance of balance in two-way trade.

The size of the US trade deficit in goods trade with India pales when compared to the $419.2 billion deficit it has with China. The Chinese premier, Xi Jinping, has refused to back down in the face of threats from Mr Trump. India, on the other hand, has waffled for too long, unsure of whether it would be suicidal to tangle with the US president. Even now, there is no certainty that Mr Modi will have the stomach for a bruising trade war should the US decide to fire another thunderbolt. Last summer, when the US first decided to raise tariffs on aluminium and steel product imports from India, China, South Korea and a few other nations, the Narendra Modi government chose not to retaliate in the hope that the trade tensions would de-escalate. As a result, India’s steel exports to the US plunged by 49 per cent to $372 million in 2018. China has continued to stand up to the US and to Mr Trump’s bellicose talk. Beijing, for instance, has not stopped buying crude oil from Iran after the US slapped sanctions against that country. India, however, has been keen to mollify Mr Trump.

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