United States President-elect Donald Trump is an erratic and unpredictable leader while Indian Prime Minister Narendra Modi is considered stable and dependable. That’s how the prevailing belief among most commentators goes. On trade matters, however, the truth is the opposite. Trump’s policies have been consistent over time and with his statements. Modi has been the one making unexpected, erratic decisions that keep trade partners and companies guessing.
What this has meant is that while Indian trade experts are reasonably sure of what to expect from Trump 2.0, India’s trade partners and importers don’t enjoy this same certainty when it comes to Modi 3.0’s trade policies.
Trump won his first election in 2016 — and took over as US President in 2017 — on the back of his ‘Make America Great Again’ campaign, a key pillar of which was to reduce the US’ vast trade deficit with the rest of the world. He spoke several times about protecting American businesses by imposing tariffs on imports. There was no ambiguity. He was clear that he would do this.
On becoming President, he followed up on his words pretty quickly. A year into his presidency, Trump rolled out a slew of tariff hikes. First, in January 2018, he hiked tariffs on solar components and washing machine imports. In March that year, he imposed tariffs on steel and aluminium imports from most countries, including India. In June, he extended these tariffs to the European Union, Canada, and Mexico. Nobody was surprised.
Even with regard to India, Trump has been consistent in his words and actions. He spent his presidency asking US Trade Representative (USTR) Robert Lighthizer to push for greater market access in India and for India to reduce tariffs. Trump himself pushed hard for India to reduce import tariffs on Harley-Davidson motorcycles, something India partially complied with.
In fact, in 2019, Trump even went so far as to revoke India’s designation as a ‘beneficiary developing country’ under its Generalised System of Preferences (GSP) programme. This meant Indian exporters across several sectors could no longer enjoy duty-free imports into the US.
At the time, Lighthizer issued a statement saying: “India’s termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors.” Again, a consistent stand, though an undesirable one from India’s point of view.
With Trump again railing against countries that impose high import duties — even calling India a “very big abuser” of tariffs as recently as September 2024 during his pre-election rallies — and reports emerging that he might appoint Lighthizer as USTR again, it’s no surprise why trade experts in India are sure of what to expect from Trump 2.0. There’s no ambiguity.
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India’s unpredictability
India under Modi, on the contrary, has followed a much more unpredictable trade policy. In 2019, India, at the very last minute, backed out of joining the Regional Comprehensive Economic Partnership (RCEP). Its main issue with the grouping was China’s dominance in it, and the fear that Beijing would use it to undercut Indian manufacturers.
Leaving aside the merits or demerits of this argument, the fact remains that India would have known about this China factor right from the start of negotiations in 2012. Yet, it chose the 11th hour to announce that it would not join. This came as a surprise to several of the countries that are part of the grouping — many of them allies and significant trade partners — who were expecting India to join.
India could have handled that episode better, even if its ultimate decision remained the same.
Further fueling the perception that India is unpredictable were the various sudden bans the country implemented on wheat, rice, and onion exports in 2022 and 2023, markets where it is a key contributor to global exports. This left major trade partners such as the US, UK, and EU flummoxed and irritated, and sent the global prices of these commodities shooting upwards.
Several of India’s trade partners even raised questions at the World Trade Organization (WTO), asking India basic questions about when the bans would be lifted, why they were implemented in the first place, and when India planned to inform the WTO about them, as is required under the agreements.
Donald Trump’s stand on multilateral bodies like the WTO has been clear — he doesn’t like them and sees no need for them. India hasn’t voiced any such opinions. Its disregard for WTO rules, thus, was surprising.
Yet, India followed this up in mid-2023 with a sudden notification placing all imports of laptops, tablets, personal computers and similar electronics under the “restricted” category, and asked all importers to register with the government.
The industry was taken aback by this move — which, incidentally, was panned by the government’s supporters and critics alike — and lobbied hard to either extend the deadline or do away with the rule altogether.
It’s only after this pushback that the government first extended the deadline, and then diluted the notification. This time, too, several of India’s trade partners had to raise questions at the WTO requesting information about the basics of the notification. No warning or explanation had been provided by India.
On the one hand, we might not like Trump’s policies and, on the other, we can find several justifications for Modi’s trade diktats. Yet, the fact remains that, with Trump, the trading world has a much better idea of what it’s getting, even if it doesn’t like it. Trade is as much about trust as it is about economics. The Modi government must reflect on the reputation it is building for India.
TCA Sharad Raghavan is Deputy Editor – Economy at ThePrint. He tweets @SharadRaghavan. Views are personal.
(Edited by Humra Laeeq)
If Laos and Cambodia – Bangladesh and Sri Lanka too wish to join – are confident about dealing with competition from China in RCEP, so should India be. Even without joining, we run a very large trade deficit with China. If CEO Niti Aayog’s recent statement represents loud thinking by the government, that would be welcome. This whole framework of Aatma Nirbhar Bharat is not leading in the direction of India becoming a developed economy by 2047. A total recast of economic orthodoxy.