Modi Govt Has To Come Clean On Tariff Concessions Dictated By President Trump

(MENAFN- The Arabian Post)

By K Raveendran

President Trump's repeated assertions that India has agreed to reduce tariffs“way down” have sparked a predictable wave of denials from New Delhi, underscoring the fraught and often opaque nature of trade negotiations between the two countries. While Trump's tendency to make exaggerated or even unverified claims is well-known, in this particular case his statements may hold more weight than the official denials coming from the Indian government. This is not without precedent.

Over the years, Indian government statements regarding international agreements, particularly those involving the United States, have frequently been shown to be less than reliable. They often reflect a strategy designed to assuage domestic political audiences rather than an accurate portrayal of diplomatic reality. The Modi government's inconsistent stance on sensitive issues, such as the treatment of illegal immigrants in a manner reminiscent of Guantanamo Bay, has already demonstrated a pattern of strategic ambiguity and reactive policymaking when dealing with the Trump administration. Against this backdrop, Trump's confidence in claiming that India will reduce tariffs suggests that some form of concession or understanding may indeed have been reached behind closed doors - even if New Delhi is reluctant to admit it publicly.

Trade relations between the United States and India have long been complicated by a wide range of issues, including market access, intellectual property rights, tariffs, and protectionist policies on both sides. Trump's focus on trade deficits and his broader“America First” agenda have made India's high tariff structure a recurring point of contention.

Trump has repeatedly criticized India for imposing some of the highest tariffs in the world, particularly on American products such as Harley-Davidson motorcycles and agricultural goods. His administration sought to rebalance the trade relationship, arguing that American businesses faced unfair barriers when trying to access the Indian market. In 2019, Trump revoked India's preferential trade status under the Generalized System of Preferences (GSP), citing insufficient progress in addressing these barriers. Against this backdrop, Trump's recent assertion that India has agreed to bring tariffs“way down” suggests that some sort of breakthrough may have been achieved, even if the details remain murky.

The suggestion that Trump's version of events is more likely to be accurate than New Delhi's denials gains credibility when viewed in the context of India's previous inconsistencies in diplomatic engagements with the Trump administration. One of the most striking examples of this pattern was the Modi government's handling of the issue of illegal immigrants and detention centres. Early reports of detention centres and the potential deportation of illegal immigrants drew sharp criticism domestically and internationally. Modi's government initially denied that any such centres existed or that large-scale detentions were planned. However, subsequent investigative reports and official documents confirmed that detention centres were indeed being built, and the government's denials were exposed as an attempt to manage political fallout. This episode illustrates how the Modi government has, on multiple occasions, adopted a strategy of issuing public denials while privately implementing the very policies or concessions it claims to oppose.

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In the case of tariffs, Trump's claim that India's reductions would be“for mutual benefit” raises further suspicion. Trump has consistently framed his trade negotiations in terms of a zero-sum game where the United States emerges as the clear winner. His concept of“mutual benefit” typically translates into greater market access for American businesses, reduced tariffs on American goods, and fewer regulatory barriers - often at the expense of the partner country's domestic industries. In the case of India, the sectors most affected by tariff reductions are likely to include agriculture, pharmaceuticals, and manufacturing - all politically sensitive industries with powerful domestic lobbies. A meaningful reduction in tariffs on American goods would likely face resistance from Indian farmers and small manufacturers, who would argue that cheaper American imports would undercut local producers and threaten jobs. This would explain why the Modi government would be hesitant to publicly confirm any such concessions, even if they have been agreed upon in principle.

Trump's consistent focus on trade deficits and his need to demonstrate concrete victories to his political base further increases the likelihood that some form of agreement has been reached. Trump's presidency was defined by his willingness to impose tariffs, renegotiate trade deals, and pressure trading partners to accept terms more favourable to the United States. For Trump to publicly announce that India had agreed to reduce tariffs suggests that he was confident enough in the existence of an agreement to stake his reputation on it. The risk of public embarrassment if no such agreement existed would seem to outweigh the benefit of making a baseless claim.

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The structure of India's political and bureaucratic apparatus also lends credence to Trump's assertion. India's trade policy is influenced by multiple stakeholders, including the Ministry of Commerce and Industry, the Ministry of External Affairs, and the Prime Minister's Office. Discrepancies between public statements and actual policy shifts are not uncommon due to the complexity of this decision-making process. Even if senior officials or trade negotiators have reached an understanding with their American counterparts, the political leadership may seek to delay or downplay any public acknowledgment until the domestic political climate is more favourable. The Modi government's track record of strategic ambiguity, particularly on sensitive economic issues, suggests that a gap between rhetoric and reality is not unusual.

It is also worth noting that Trump's negotiating style often involves public pressure as a tactic to accelerate or cement agreements. By publicly declaring that India has agreed to reduce tariffs, Trump may be attempting to force New Delhi's hand and lock in the agreement before domestic political opposition can mount. This strategy has been evident in Trump's dealings with other trading partners, including China, Mexico, and Canada, where public pressure and the threat of tariffs were used to extract more favourable terms. In India's case, Trump's announcement may serve to create a political fait accompli, making it harder for the Modi government to backtrack without facing diplomatic embarrassment or jeopardizing broader bilateral ties.

The historical precedent of India's inconsistent handling of trade negotiations, coupled with Trump's strategic use of public pressure and his broader pattern of securing trade concessions from strategic partners, suggests that Trump's claim about India reducing tariffs is more plausible than New Delhi's denial. While New Delhi may seek to downplay the significance of any trade concession, the underlying reality is that India's strategic interest in maintaining close ties with the United States likely compelled it to make some degree of compromise on trade. Trump's claim that the changes would be for mutual benefit should be understood within the context of his broader negotiating strategy - one in which mutual benefit often means disproportionate advantage for the United States. (IPA Service )

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