Raghuram Rajan gives 3 reasons behind Trump's steep tariffs on India

Former Reserve Bank of India Governor Raghuram Rajan has outlined several reasons behind US President Donald Trump's decision to impose steep 50% tariffs on India, saying that it is "essentially an exercise of power."

In an interview to India Today, Rajan said that there are a complicated set of rationales behind Trump's love for tariffs.

Rajan said that Trump certainly believes that trade deficit is evidence that other countries are taking advantage of US instead of sending their goods "cheaply" for the benefit of American customers.

Rajan said that Trump has maintained this view since the 1980s, pointing out how the Republican was "critical of Japan" back then.

"He has always believed that tariffs are a way of levelling the playing field," he said.

The former RBI governor told India Today that another reason why Trump is pushing tariffs on India is due to his belief that such duties act as a "tax paid by outsiders" rather than on US consumers.

He said that Trump thinks of it as a form of cheap way of getting revenues which can offset some of the tax cuts his administration has implemented.

Rajan added that the third reason behind Trump's tariff push is the punitive nature of these measures.

“It can be a way for the US to essentially use force when it doesn’t want to use its military,” Rajan said, adding that some aspects of each of these reasons serve as the broader purpose of imposing tariffs.

He added that the outcome is "often that other countries suffer.”

The former RBI governor also said that India has been treated more harshly than other nations under Trump’s tariff regime, noting that while Asian countries were largely placed in the 20% category, India was hit with a higher 25% base tariff.

In April, Rajan had criticised the Trump administration’s reciprocal tariffs on several countries, calling them a "self-goal".

He said that the move would primarily hurt the US economy.

Earlier this month, Rajan said that while India may rethink its trade with Russia after Trump's demands, it is “hard to negotiate with a gun to your head”. He added that Trump's pressure tactics appeared to be an “exercise in power”.

Trump's 50% tariffs on Indian goods came into force on August 27 after the deadline ended without both sides finalising a trade deal. Trump had earlier imposed 25% tariffs on India and topped it with 25% more tariffs for New Delhi's continued purchase of Russian oil.