The trade mechanism put in place after the second world war to facilitate global trade and create prosperity across the globe has seemingly let down tens of millions in the US. Blue-collar Americans feel the system didn’t work for them. Angry, they did what was unthinkable and elected Donald Trump to the most powerful office in the world.
Donald Trump espouses an America First policy which puts the interests of American voters, ahead of corporate interests. The US, under the leadership of Donald Trump, has reversed its decade’s old policy of enabling China’s rise to contain China.
This has implications for Indo-US trade. While America’s modest $24 Bn trade deficit with India pales in comparison to its $222 billion trade deficit with China, the American leadership is leaving no stone unturned in working for the American people even if it means erecting tariffs on goods exported by India.
To mitigate the impact of a potential trade war the Indian leadership should understand that in the eyes of blue-collar American voters China is the real threat, India much less so. Consider that farmers in America who benefited significantly from exporting soy to China aren’t fazed that China has erected tariffs on products they export; they see this as a necessary part of containing China whose ascent could dramatically alter the global landscape and America’s ability to lead. Americans who value commerce are willing to endure financial losses to ensure America stays No 1.
In the minds of Americans who voted for Trump, India is an economic and military minnow incapable of posing any challenge whatsoever to American leadership. Furthermore most view India as a natural ally because like America, India is a democracy that fought for independence and because the Indian diaspora in America has proven themselves in their eyes. In a trade war focused on containing China, India should be an afterthought.
Why America Erected Tariffs Against India?
The US rightly sees China as a threat. Consider that American companies that want to do business in China often aren’t granted access to the Chinese market because of the country’s protectionist stance. This view is widely shared by experts across the globe.
Foreign companies enter China enthusiastically yet are forced to retreat when local competitors abetted by the Chinese government make it impossible for them to do business. China also regularly steals trade secrets from the US and engages in corporate espionage against American companies. It regularly violates patents as well all of which costs billions to American corporations.
Furthermore, China doesn’t share the liberal values of the US. Vast censorship across China including a ban on Google and Facebook is a clear indication that the Chinese leadership is unwilling to allow its citizens access to information that might pose a threat to their leadership.
Also, the Chinese leadership is creating homegrown companies capable of taking on American technology giants. Hence rather than working alongside the US as India does, China seeks to compete with America. Trump and those who elected him to office understand this well.
So it’s understandable why the US put tariffs on China. China treats American companies unfairly, manipulates its currency, commits espionage against America, prevents the flow of information to its citizens, has an atrocious human rights record, and denies its people the right to vote.
India grants American companies’ almost unrestrained access to its market, treats US companies fairly, works with Americans on human rights, helps America fight terrorism, exports its best minds to America, and is a democracy. America’s decision to impose tariffs on Indian goods when seen in this context is puzzling unless viewed as part of a broader US strategy to ensure American dominance of the globe indefinitely.
In history, the rise of a new power has rarely been peaceful, to eliminate any threat to its leadership the US is leaving no stone unturned. Its removal of Indian exports from the Generalised System of Preferences costs Indian exporters a total of $190 Mn, a pittance of India’s total exports to America. However, it sends a signal to the world that America is changing.
China has already capitulated somewhat to American pressure, as no doubt has India, yet as long as India’s ambitions and those of America remain aligned, there is no reason to believe that America will impose debilitating tariffs on India. American leadership wants to show there’s a new sheriff in town and things will be done differently from now on, it has, and once all global actors come to terms with this fact and toe the Americans line, America will normalize trade relations with them, although on its terms.