Standing up to Trump

India and the US are natural allies, but can America learn to accept that India will always retain its strategic independence?

- HINDOL SENGUPTA

Depending on who you are reading, the 25% tariffs announced by US President Donald Trump on India, and the flurry of his petulant tweets, have not provoked the Indian government to respond.

For once, there is benefit in the ponderous nature of Indian bureaucracy. A slanging match with Trump is beneath India and it would only encourage more petulant behaviour. If the world’s biggest democracy cannot show propriety, at least the world’s oldest needs to display dignity.

This controversy has many layers which are worth unpacking. First, to take America’s point, a readjustment of tariffs is not necessarily a bad thing, and it may even have been required. Overdependence on American largesse was never going to be sustainable in the long-run, and its national debt of $36 trillion is at dystopian levels. There is a case to be made for more equitable levels of trade.

But the manner and tonality in which the Trump administration has gone about rolling out these tariffs, while at the same time wrecking the existing international trade system, will be remembered long after the Trump presidency ends.

As far as economic damage is concerned, in the mid-to-long term, to the Indian economy, it is unlikely to be extremely significant. Though some immediate-term pain is inevitable. It is important to note that Trump's actions may well prove to be detrimental to his own constituency in Americas prices of goods—especially things like pharmaceuticals and electronics—rise. In the end, the price of this tariff rise will be paid by the Indian consumer, especially since India’s exports to the US are less than 2% of its GDP. In comparison, Vietnam and Indonesia, at 20% and 19% tariff-levels, get 30% and 10% of their GDP from exports to the US. Contrary to popular belief, negotiations between the US and India are still on and the final tariff level will most probably be lower than 25%.