New Delhi: India must prepare for the Donald Trump presidency in the US in two ways, according to trade experts: It should be ready to cut duties on a basket of items to offer the US something attractive going forward, while also taking adequate measures to prevent the dumping of goods from China here as Trump tightens restrictions on imports from that country.
Trump’s first term as US president saw a relatively acrimonious relationship with India on trade issues, with the US increasing tariffs and withdrawing key exemptions for Indian imports, and the Indian government retaliating with duty hikes of its own.
Simultaneously, Trump took a hard line against Chinese imports, a policy that carried over into Joe Biden’s presidency and is expected to become even harder in Trump’s second term. The fear among trade experts here is that this would lead to the dumping of Chinese goods in India instead, which would further worsen our already vast trade deficit with that country.
Dumping is when goods are exported from a country at a price lower than the prevailing price within that country, usually to get rid of excess supply.
However, experts say there are several items, such as Harley-Davidson motorcycles—Indian duties on which Trump has previously railed against—that India can comfortably reduce tariffs on without any significant financial impact.
Overall, the view is that India stands to gain more from trade with the US than vice versa, and so we should be ready to accommodate Trump’s “transactional” nature.
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Dealing with Trump will require concessions
“If Trump is raising the issues of duties or market access, if we want to have the same kind of facilitation in the US, we have to have a basket of goods ready to offer concessions on,” Ajay Sahai, director general and CEO of the Federation of Indian Export Organisations, told ThePrint.
Over the course of 2018 and 2019, Trump raised the issue of India’s import duty on Harley-Davidson motorcycles several times. Even though India had in February 2018 cut import duties on high-end motorcycles to 50 percent from 60-75 percent, Trump found this new rate to still be “unacceptable”, he told CBS News in a 2019 interview.
Sahai added: “I personally feel that if the 50 percent duty on Harley-Davidson bikes still remains a problem, with 12 out of 16 of the models of the bike being assembled in India (and therefore not attracting import duties), there’s no point in not reducing the duty further, because that will put us on a better footing with Trump.”
India is looking to increase its exports to the US across several categories, including pharmaceuticals, apparel, gems and jewellery, and automobiles. However, in order to receive concessions on these or to avoid a duty increase, India would have to provide concessions of its own.
“Unless we come to red-flag items like dairy or pharma price control, there is no harm in giving them what they want because we have a lot more to gain from the export front and a lot less to lose on the import front,” said Pankaj Chadha, senior vice chairman of the Engineering Export Promotion Council of India.
“I don’t mind the import duty on Harley-Davidson coming down to zero. I don’t think there’s that much of a market for it here,” he added. “Just as we reduced duties on apples, walnuts, etc., we will have to keep giving such concessions to them.”
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Easier relationship under Biden might worsen again
The duty reductions by India on apples, walnuts and other items took place while Biden was president of the US, in 2023. The view is that India’s trade with the US gained under Biden’s presidency because he didn’t hike existing import duties and also provided exemptions to some items that India exported to the US, such as engineering goods.
“India’s trade in goods and services with the US has been increasing at a faster rate than its trade with the rest of the world,” said Ajay Srivastava, former director general of foreign trade, Government of India. “To give credit to Biden, no new tariffs were imposed during his tenure that were not already in place.”
In fact, the duty reductions that India implemented in 2023 marked an easing of trade tensions between India and the US, which had ramped up during Trump’s first term.
Trump had in 2018 imposed higher tariffs on aluminium and steel imports, including those from India. When the Indian government’s requests for exemptions fell on deaf ears, it retaliated by imposing higher tariffs on 29 items imported from the US in 2019. The duty hikes by India were designed in such a way that the additional cost imposed on American exporters would be the same as the higher cost paid by Indian steel and aluminium exporters.
In the run-up to Biden’s trip to New Delhi in 2023 for a bilateral meeting with Prime Minister Narendra Modi as well as for the G20 summit, the Indian government decided to walk back these retaliatory measures.
Chadha added that the Modi-Biden relationship had resulted in significant benefits for India’s engineering exports as well.
“During the Biden administration, after PM Modi visited the White House (in June 2023), there were a lot of exclusions provided to India on the import of engineering goods,” Chadha said. “As a result of which the US is our biggest market for engineering exports and we benefited a lot from that.”
Now, however, he fears that Trump might do away with these exemptions.
“I am worried about whether that exemption under Section 232 (the section that dealt with the steel and aluminium import duty hikes) will be withdrawn,” Chadha said.
Overall, he said that a study conducted by the Engineering Exports Promotion Council of India found that India gained a lot more from the exemptions the US gave it than the US gained from the duty reductions that India implemented.
“So, that’s an area where Trump might discontinue these exemptions,” Chadha said.
In fact, Trump as recently as September this year called India a “very big abuser” of trade tariffs and has talked frequently in his pre-election rallies about how he would impose reciprocal tariffs on all the US’s trade partners.
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US’s China focus — threats & some opportunities for India
Over the course of this year, both the US and the European Union have imposed restrictions and higher tariffs on the import of key goods from China. This comes as a threat as well as an opportunity for India.
“What happens in such a scenario is that China would naturally have surplus capacity and would like to dump it here and there,” Srivastava explained. “India will have to be particularly careful because the US and EU were the largest markets for China and since these are now restricted, India will naturally be a good country for dumping.”
However, he added that this careful approach should not extend to an “indiscriminate” use of anti-dumping duties, since these also hurt Indian manufacturers.
“I would not recommend using the anti-dumping safeguard tool in an indiscriminate way because the items on which we impose these duties on are intermediate goods or raw materials,” Srivastava explained. “The moment this happens, value added products by thousands of MSMEs within India become pricier, which means they can’t compete on exports and also lose out on the domestic market.”
The impact of the US’ policies on China can be captured neatly by looking at India’s solar industry. As ThePrint reported last year, India’s solar module exports to the US surged due to that country’s restrictions on Chinese imports, but the cheap price of Chinese modules meant Indian solar power producers still relied significantly on Chinese imports.
The consensus among all three trade analysts ThePrint spoke to was that Trump would likely push for bilateral trade deals with individual countries rather than following a multilateral approach where duties are hiked for all countries. This would mean he could potentially increase tariffs for Indian goods in particular since he feels Indian import duties are too high.
However, according to Sahai, there is also a significant opportunity for India in the return of Trump.
“With Donald Trump coming back, the China + 1 policies of the US companies will get further accelerated,” he said. “There will be much more movement in taking business away from China and some of that business will obviously come to India.” A China + 1 policy refers to the strategy, increasingly popular since the COVID-19 pandemic, of diversifying manufacturing away from being solely located in China.
This is why it is in India’s interest to have a policy ready where we can offer something to the US in exchange, he added.
“While we might be looking at pharmaceuticals, apparel, gems and jewellery, automobile exports to the US, he may be looking at some other big-ticket items for the negotiations,” Sahai said. “That’s why we should also have our policy ready where we can offer something in exchange to the US.”
Offering concessions to the US would be tricky in some areas, he said, but is possible in several others, even apart from the Harley-Davidson motorcycles.
“They (the US) have talked about the import of dairy, where we have religious sensitivities and [it] may not be possible, medical equipment where we have a price control order that we can maybe reexamine and the (new rules on the) import of laptops may need a relook,” Sahai said.
Overall, while the consensus is that Trump will be more difficult to negotiate with, India stands to gain more from being flexible in such negotiations.
“When you look at the two countries on a bilateral basis, we have a lot more to gain than the US has to gain,” Chadha said. “I don’t think there are too many items in the US that India needs to be worried about in terms of imports.”
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