Editorial     

Published: April 15, 2025
Updated: April 15, 2025

Trump tariffs tilt at windmills!: India needs negotiated tariff cut

Much like Cervantes’s brave but foolhardy knight Don Quixote, who tilts his lance at windmills, imagining them to be his enemies, US President Donald Trump has created the spectre of turning the global economy upside down by announcing sweep ing reciprocal tariffs on all of America’s trading partners. His grouse over seemingly unfair overseas tariffs probably perhaps masks the real intention of facilitating more American exports. His steep tariff announcements have created global shock waves, sending stock markets across the world into a tailspin and wiping out billions of dollars of investor wealth.

There have been the inevitable protests from the European Union, Canada and, nota bly, China. The latter almost immediately retaliated with a 34 per cent tariff on American goods entering China. With the US President in no mood to relent, it seemed in the initial aftermath like the start of a global trade war.

Among the other affected countries, Cambodia and Vietnam played safe and preferred negotiations with the US, as did several other countries. But the Dragon was breathing fire, making it clear that it was ready to fight it out with the US.

As far as India was concerned, President Trump announced the imposition of a recip rocal tariff of 26 per cent – which was not so draconian as his imposts on several other countries. Although less than the tariffs on other countries, the 26 per cent US import duty on Indian products would have been detrimental to the Indian economy. However, neither Prime Minister Narendra Modi nor any of his economic aides in the government chose to issue even a nominal protest, or for that matter inform Indian citizens about the likely impact of the Trump tariffs on the economy.

Though Mr Trump seemed undaunted by the opposition from several countries, espe cially China, he could not remain unconcerned when his own fellow-American investors took matters in their hands and started selling US treasury bonds along with stocks. This was an unprecedented step, as the spectacle of American investors selling treasury bonds pointed to an extra-ordinary sense of instability.

It was thus that a rattled US President decided to reconsider his move and paused the implementation of his tariff plan by 90 days.

But anything can happen during these 90 days. India should wake up and evolve a strategy to get Mr Trump to tone down his import tariffs, without giving an impression of retaliation. During Mr Modi’s recent visit to the US, President Trump had minced no words in criticising India’s import tariff regime. Now, it is Mr Modi’s turn to take a firm stand in the national interest and bat for an acceptable solution to the tariff problem, but without affect ing our relations with the US. It is worth stressing here that all countries evolve their foreign policies with their national interest in mind.

It is important to note that India’s trade surplus with the US at $ 64 billion is far lower than that of China ($ 320 billion), Mexico ($ 180 billion), Vietnam ($ 120 billion) and Germany ($ 90 billion). This fact should strengthen India’s case for a negotiated tariff reduction.

At the same time, India should approach like-minded countries and enter into free trade agreements for mutual benefit. In a world which is turning more and more protection ist by the day, such FTAs will prove highly beneficial to India.