India's trade deal frenzy offers a Trump hedge
Donald Trump's penchant for dealmaking is rubbing off on India. The world's fifth-largest economy is feverishly negotiating trade deals with the European Union and the UK, and is warming up to joining a China-backed bloc that it previously shunned. The outreach will protect the South Asian country from future trade wars, even though it may benefit from the U.S. president's current onslaught.
Instead of retaliating against the 26% duty Washington slapped on its exports, India is powering ahead with talks to clinch a U.S. trade deal that will include deepening supply chain integration. India has an opportunity because it was hit with a lower tariff than those the White House is applying to most other Asian manufacturers including Vietnam and Bangladesh, plus key Indian exports including pharmaceuticals and IT services were spared from levies for now.
The various trade deals under active discussions, including one with the U.S., would cover 71% of the country's exports, says Neelkanth Mishra, chief economist at Axis Bank. India's existing pacts only cover 30% of its exports. The U.S., EU, and UK together account for more than $340 billion of India's bilateral trade.
Yet if the U.S. thought the trade war would pull India closer into its orbit, it may yet be disappointed. Much like China, India may opt to get closer to its neighbours in Asia. B V R Subrahmanyam, CEO of NITI Aayog, a government think tank, wants New Delhi to join the 15-member Regional Comprehensive Economic Partnership in Asia Pacific, the world's largest trade deal by GDP. Meanwhile, New Delhi's chief economic advisor V. Anantha Nageswaran supports more Chinese investment in India.
New Delhi is distrustful of its northern neighbour but it also sees safety in a multipolar world, something it has emphasised in recent years in response to criticism of its stance on Russia in the Ukraine conflict. There may be other red lines too. India is unlikely to yield to U.S. demands on opening up its farm sector, for instance.
Ultimately, Trump has proved himself a fickle ally and while India wants to be an export powerhouse, it would be a mistake to become heavily dependent on one trading partner like Vietnam did. The Southeast Asian country answered earlier U.S. calls for an alternative factory to China. Now it is set to pay a big price. The case for India to forge closer ties with friends, foes and everyone in between is compelling.
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CONTEXT NEWS
India does not plan to retaliate against U.S. President Donald Trump's 26% tariff on imports from the Asian nation, Reuters reported on April 6, citing an unnamed government official.
New Delhi sees an advantage in being one of the first nations to have started talks over a trade deal with Washington, and is better placed than peers like China, Vietnam and Indonesia, which have been hit by higher U.S. tariffs, the report quoted a second official as saying.
