The flashy photographs of Narendra Modi, Xi Jinping, and Vladimir Putin laughing and exhibiting newfound camaraderie in Tianjin, China, have gone viral all over the world, more so among the policymakers in the White House. If compelling leaders of the world’s three largest economies to huddle together and uniting countries with different ideological backgrounds on a common issue could qualify for a Nobel Peace, then US President Donald Trump should certainly be awarded with the prize. He has single–handedly managed to get the leaders of India, China and Russia together, especially against his own country.
While India’s relations with Russia were more or less steady and trade was going on smoothly, the same could not be said about India and China. The Galwan incident became a major roadblock in India-China relations and trade, adding to the existing mistrust and freeze in friendship. The first sign of thaw appeared during the BRICS meeting in Kazan, Russia, last year, where the issue of “de-dollarisation” was elaborately discussed. India diplomatically distanced itself from the proposal to seek an alternative to the US dollar. India also clarified that its emphasis is more towards the promotion of cross-border trade using local currencies and reducing exchange rate losses.
Even after that meeting between Modi and Xi in Kazan, it would have been difficult for mandarins in the foreign office to convince the stakeholders on the need for the Prime Minister to visit China. But now, after Trump’s tariff war on India, there seems hardly any need to explain the bonhomie between India and China. The Shanghai Cooperation Organisation (SCO) summit gave the necessary reason and opportunity to signal Trump that several doors are open to New Delhi for trade and commerce, beyond America.
India’s cautious move
While the SCO’s Tianjin summit is seen as an “anti-West-US” axis, New Delhi has been cautious enough to refrain from naming the US or describing Trump’s weaponisation of tariff as a punishment for purchasing crude oil from Russia. Russia and China themselves have used the platform to send their respective signals to the US. But unlike the Association of Southeast Asian Nations (ASEAN), which has a free trade arrangement, the SCO or BRICS do not have such an arrangement. Though the SCO seeks to facilitate economic cooperation, the focus is on bilateral trade between member countries. In this context, how far the SCO or the BRICS would solve India’s trade volume and other issues vis-à-vis US tariff on Indian exports is worth pondering over.
Meanwhile, the White House appears to have received New Delhi’s signals sent from Tianjin. Speaking from the Oval Office, Trump has reportedly said, “We get along with India very well, but for many years, it was a one-sided relationship.” Needless to say, the high tariff on Indian exports to the US compared to the low US tariff on exports to India has tilted the balance of trade in India’s favour. From $652 million in 1985, the US trade deficit with India has grown to $45 billion in 2024.
The reason for this is not far to seek. While India’s services exports to the US grew exponentially, American manufacturing was close to nil as its dependence on China increased. America had very little to offer to India in exports and the exchange rate was highly forbidding for the Indian importer and the consumer.
Instead of ranting about India’s high tariff, Trump would be better advised to speed up domestic manufacturing and bring back the manufacturing units from China. Elsewhere in the trading world, old structures are being dismantled. China has announced it will eliminate all tariffs on imports from all 53 African countries it has diplomatic ties with, aiming to boost trade and offer African exporters broader access to its market.
Washington and Britain finalised the US-UK Economic Prosperity Deal (EPD) in June this year. This trade deal lowers tariffs on certain British goods like cars, aerospace equipment, steel, and aluminium. Indonesia and Singapore signed landmark deals to trade low-carbon electricity, collaborate on carbon capture and storage, and develop green industrial zones, aiming for $10 billion in investment and 3.4 GW of power exports by 2035.
Also read: Chinese memes, videos & commentaries say Modi overshadowed other leaders at SCO
It takes two to improve ties
On its part, New Delhi will surely have to reconsider lowering its tariff structure without compromising its “Make in India” schemes, “Aatmanirbhar Bharat” initiative, and intended agricultural reforms.
Though FTA negotiation with the US is on a slow track, it is expected to pick pace once the two sides complete their homework in terms of trade in goods, including trade remedies (safeguards, anti-dumping measures and countervailing duties), customs procedures, rules of origin, technical barriers to trade, sanitary and phytosanitary measures, HS list and Bound and Applied tariffs. The list of ‘to do’ is excruciatingly long for negotiators of both countries and requires great patience and understanding of the trade practices of the two economies.
Both India and the US should realise that whether it is trade or security, strategy or diplomacy, relationships cannot be one–sided.
Seshadri Chari is the former editor of ‘Organiser’. He tweets @seshadrichari. Views are personal.
(Edited by Prashant)
India also deserves a Nobel prize for ruining itself with socialism.