India-US relations: News and Discussions IV

[nandakumar]

What prevents countries from off loading their dollar reserves or converting to gold.

The supply of freshly minted gold is limited. Any shift from US Treasury instruments to gold would only push up the price gold. At what point do we say, the valuation of gold is now into 'bubble' territory?

[Dilbu]

Article by Kenneth I. Juster in Council on Foreign Relations

He expects India to cut oil imports from Russia in favour of US oil, invest more in the US, and meet certain American trade demands, possibly prompting Trump to attend the Quad summit. However, the author seems unaware of the level of distrust in India. Oil imports from Russia have actually increased and the Quad meeting in New Delhi will likely be cancelled. The opportunity to repair relations may already have passed.
Will Trump’s India Tariffs Affect a Critical U.S. Partnership?

Ultimately, the high tariff rates on India appear to me to be part of a negotiation. This is a similar tactic to what the president has used in other deals, including the trade agreements with Japan and the European Union. Nonetheless, Trump’s rhetoric and public threats could well make it more difficult domestically for Modi to take the desired measures.

I do not believe that Trump approaches these trade issues as part of a broader Indo-Pacific strategy, or as inconsistent with U.S. and Indian joint strategic objectives in the Indo-Pacific region. It would therefore be a mistake—and certainly premature—for the government of India to view these tariffs as fundamentally undercutting the strategic partnership that the two countries have developed over the last twenty-five years. I believe the president still has a strong interest in the U.S.-India partnership and enjoys his good relationship with Modi. But he also favors the use of tariffs to try to rebalance the economic relationship and, if he imposes the additional tariff, to help close another deal—one between Russia and Ukraine—for an end to hostilities.

The reaction in India has been multifaceted. Initially, because the government of India felt the parties were close to announcing a trade deal, the reaction was one of surprise that there were additional issues to address. When the level of rhetoric from the White House increased by labeling India’s tariffs “obnoxious” and calling the Indian economy “dead,” there was a sense of indignation among Indian commentators. This was exacerbated by the president’s repeated statement that he had brokered a ceasefire between India and Pakistan, which the Indians have publicly disputed (thereby irritating Trump in the process).

More recently, when the president announced the threatened imposition of a 25 percent additional tariff on August 27, India’s Ministry of External Affairs called this action “unfair, unjustified, and unreasonable,” and asserted that India “will take all necessary steps to protect its national interests.” Modi also vowed not to compromise the welfare of India’s farmers, dairy sector, or fishermen, and stated that he is personally ready “to pay a heavy price for it.” Regrettably, respected voices in India are now questioning the value of their strategic partnership with the United States.

Given the vibrant political discourse in India, Modi needed to respond publicly and firmly to the new tariffs. But he should also be careful not to paint himself into a corner and to remain open to discussing ways to resolve the current trade dispute. I understand that the two leaders are trying to arrange a meeting in the United States in late September, when both plan to attend the UN General Assembly.

Beyond these economic issues, the failure to conclude a deal could cause spillover collateral damage to other aspects of the bilateral relationship, including in defense and technology cooperation. The weakening of the U.S.-India relationship would inevitably be of strategic benefit to China—and that is not in the interest of either the United States or India. Both Washington and New Delhi should recognize that their bilateral relationship is more significant and impactful than any arrangement either of them can work out with China, which remains a strategic challenge for both countries.

While an early resolution of the Russia-Ukraine conflict would eliminate any tariff on Russian oil imports, this protracted conflict is unlikely to be settled soon. Accordingly, while it would probably be impractical for the Indians to terminate all oil imports from Russia, they may wish to quietly lower their level of Russian oil imports and substitute them with more energy imports from the United States. Some reports indicate that this process could already be starting. If so, that would enable New Delhi to request Washington to delay any implementation of the threatened tariff. And if Trump and Modi can resolve outstanding trade issues when they meet in late September, perhaps the United States will agree to drop the extra 25 percent tariff altogether, even if the Russia-Ukraine conflict has not been resolved.

Regarding the 25 percent reciprocal tariff, Trump’s imposition of this is, in my mind, a negotiating tactic rather than a desire to jettison the U.S.-India strategic partnership. Under these circumstances, New Delhi should avoid the temptation to impose retaliatory tariffs on U.S. imports, which would likely be counterproductive. Fortunately, I see no evidence that India is planning to take such action. However exasperated the Indian government may be by recent events, it should try to be as creative as possible in presenting further ideas for discussion with its U.S. counterparts.

Perhaps the Indians can carefully review other U.S. trade deals to see if there are elements that they could borrow to enhance what they have already put on the table. This could include pledges of further investment by Indian companies in the United States, the allowance of duty-free access for certain agricultural items such as cotton and blueberries, and the acceptance of some other items under limited quotas. I also recall during Trump’s first term that the two countries had outlined a proposal for limited U.S. dairy imports. Perhaps that could be resurrected.

Based on my experience, Modi is an extremely skillful interlocutor and is well suited to a high-stakes meeting with Trump. The prime minister would likely want to emphasize the strategic importance of the bilateral relationship and his appreciation for the good rapport between the two leaders over time. While Modi should be prepared to provide ideas on how to sweeten India’s offers on trade, procurements, and investments, he could also reference his own constraints as the head of a democratic government and the areas where he will need some U.S. understanding and flexibility.

Hopefully, the two leaders can then reach an agreement, with a final reciprocal tariff rate conceivably at 15 percent but in no event greater than 20 percent. Such a resolution would also pave the way for a visit by Trump to New Delhi later in the year for the Quad summit.

[A_Gupta]

> Slowly but surely both Biden and Trump are inadvertently destroying American consumer spirit.

Surely Biden would be in the past tense?

[A_Gupta]

Supposedly the US has put 64% tariff on Indian solar panels.

[saip]

> Slowly but surely both Biden and Trump are inadvertently destroying American consumer spirit.

Surely Biden would be in the past tense?

One has allegedly dementia but the other is definitely DEMENTED.

[Deans]

Slowly but surely both Biden and Trump are inadvertently destroying American consumer spirit. Problem is when that spirit declines the surplus capacities that is built by businesses to cater to that consumerism is going to decline. China is suffering right now due to that but at some point that is going to hurt American economy. Until then these Tariff games will look like a good play for the current Admin.

The Chinese and Russians can stay poor longer than the American voter.
Whatever grouse the Chinese may have against the party an Xi, they will come together against what they believe is US imperialism.
Similarly, NATOs actions against Russia have revived the spirit of WW2. Russians will make the sacrifices necessary to see this war to the end.

[gakakkad]

I am increasingly beginning to think tharki Santra is either compromised by CCP or they have some bad kompromat on him .

[Jay]

Something has unraveled beyond redemption between the US and India in the last few months. I think we are in the early days of an attempted “regime change” in India. This might not have been a planned course of action, but rather a happenstance that anti-India forces have stumbled upon—and now they are positioning their pieces to make a move.

Forget about Trump’s tantrums for a moment—no one is surprised by that—but I have never seen India’s MOE officials so lacking in answers. Maybe they are still in shock from the backstabbing by this Trump administration. I have also never seen our Foreign Minister use phrases like “no logic” or “this is unfair” while pleading the case to an audience that seems hell-bent on causing damage. For crying out loud, even the Chinese have started advising us on how to deal with Trump.

I do have confidence in this team, but the NaMo government needs to open its eyes and start recognizing that the problems created by these foreign forces are essentially the same as those created by the local Congress-Rahul gang. There seems to be a strong synergy between what the Indian opposition is saying and the Trump administration’s attacks, which are using those very same lines.

We went as far as we could with Trump until now, but the calculus has changed—and we have to adapt. We need to focus inward and do so ruthlessly if we want to come out ahead. We need to recognize that the West and other anti-India forces are not just targeting Indian influence, but Indian capital as well. Perhaps they have realized that this is the right time to spread their tentacles deeper into the Indian capitalist class to gain more control over India. That is why I believe there is so much chatter about Adani, Ambani, and other Indian billionaires. Control them, and you can control the Indian electorate to a certain extent.

We need to do what China did—protect our interests by protecting our capitalist leaders.