Interview: Trump's India tariff threats just a trade tactic for better deal, says ORF's Dhruva Jaishankar

Prime Minister Narendra Modi and US President Donald Trump

US President Donald Trump’s 25 percent tariffs on India along with repeated threats on imposing an additional penalty for Russian arms and oil purchases is nothing more than a negotiating tactic for more favourable terms of trade by the former real-estate baron turned President, according to Dhruva Jaishankar, Executive Director of Observer Research Foundation America (ORF) America.

“India feels it has offered very attractive and unprecedented terms on trade but Trump seems to be asking for more. India is also prepared to stand its ground. While the US is the most attractive export destination, India is not nearly as trade dependent as some other economies,” Jaishankar told Moneycontrol in an interview.

Jaishankar says that a consequence of all of this is that the India-US political relationship continues to sour, even if day-to-day cooperation carries on in a variety of fields.

“But it’s equally possible that we could see some sharp reversals on various fronts in the year ahead,” he added.

Jaishankar points out that “what is common to all of the recent tariff deals (with US) is that nothing is completely settled. A consequence of a lot of this will be a number of economies outside China and the US consolidating relations with each other: the India-UK trade agreement being a case in point.”

India and the UK signed a trade deal last month giving zero-duty access to a host of Indian labour-intensive exports such as textiles and leather, while New Delhi offered limited concessions to British automobiles and whisky.

India and the US are presently negotiating a Bilateral Trade Agreement (BTA), the deadline for which is Fall of this year. This after they seemingly failed to agree to a mini-version of a deal before August 1, when Trump’ reciprocal tariffs kicked in.

The US President on July 30 slapped a 25 percent tariff on Indian goods along with an unspecified penalty for Russian arms and energy purchases. Following this, the President on August 5 again said that he will significantly raise the country-specific duties paid by New Delhi for purchasing crude oil from Moscow within the next 24 hours.

On Trump targeting India due to the South Asian nation’s ties with Moscow, Jaishankar said “the Russia-factor speaks for itself. Trump believes that India, along with China and Brazil, can put pressure on Russia to stop the war.”

India believes that not only is this not possible, but that relations with Moscow remain vital for defense, energy security, food security, and the strategic balance in Eurasia, he said.

In a sharply-worded statement on August 4, India defended its decisions on ensuring the country’s energy security, following Trump’s social media post threatening New Delhi with additional tariff over its oil trade with Moscow and allegedly profiting off it.

Weighing in on whether India will lose the tag of being the preferred alternative to Beijing given the recent developments, Jaishankar said, China-plus-one is not an official strategy.

“It’s up to private companies who will have to recalibrate once all tariff lines are settled. I know, for example, that Japanese, Korean, and some European companies are continuing to double down on investment in India because of concerns about Chinese oversupply and U.S. tariffs,” he said.

The China-plus-one strategy refers to a policy direction primarily adopted by Western nations encouraging their companies to minimise supply-chain dependency on China by diversifying the countries they source parts from.