Trump's Tariff Talk Will Target The Farm Sector

Washington is likely to ask Delhi to reduce tariffs on US farm products. India needs to protect its farm sector to ensure food security and protect livelihoods

- Biswajit Dhar

During the two months since Donald Trump's decisive victory at the hustings, the incoming administration has repeatedly hinted at the disruptions the global economy will have to face due to recalibration of the United States (US)'s policies vis-à-vis its major partners. Within weeks of being assured of a second term as the US president, Trump announced his decision to increase tariffs on imports from Canada, China, and Mexico immediately after his inauguration. India escaped being among the targeted countries even though the President-elect had consistently railed against India's relatively higher tariffs, labelling India as the "tariff king". However, not too long after this, Trump announced that his administration would impose "reciprocal tariffs" on India arguing, "[I]f they tax us, we tax them the same amount. They tax us. We tax them. And they tax us. Almost in all cases, they're taxing us, and we haven't been taxing them". He elaborated in typical Trump fashion, "If they want to charge us, that's fine, but we're going to charge them the same thing". Trump's commerce secretary pick, Howard Lutnick, emphasised that "reciprocity" is something that is going to be a key topic for the Trump administration. This intent of the incoming administration was hardly surprising as the President-elect had underlined on his campaign trail that "the most important element of [his] plan to make America extraordinarily wealthy again is reciprocity".

How will the Trump administration's penchant for "reciprocity", a policy that was practised by the mercantilists in the Middle Ages, affect the future of India-US trade relations? The imposition of higher tariffs could significantly impact India's exports to its largest trading partner, which, for the first time, is accounting for ~19% of India's total exports in the current fiscal.