Trump's Trade War: An Indian Perspective

Abstract

This paper examines the implications of the Trump Administration's U.S. trade policy on U.S.–India relations and the Indian economy against the backdrop of strengthening political and strategic ties between the two countries, which have been strong since the beginning of this century. Trump's strategy of using tariffs as the bargaining chip in bilateral economic relations with India, while ignoring mutual geopolitical interests, has coincided with new protectionist tendencies in India under the Make in India strategy of the Modi government, setting the stage for a protracted bilateral trade dispute. U.S. safeguard duties on steel and aluminium have taken a toll on India's exports of these products to the United States, but these products account for a tiny share of India's total exports to the United States. The hard hit was Trump's termination of India's designation as a beneficiary developing nation under the Generalized System of Preferences (GSP). The GSP abolition is likely to have a much more significant effect on the Indian economy as exports under the program are heavily concentrated in the traditional labor-intensive industries. However,  given the handsome mandate received by the Modi government at the May 2019 election and that the next election is four years away (2024), GSP abolition is unlikely to receive much weight in determining India's position in trade negotiations compared with the new protectionist policy stance stemming from the Make in India strategy. The WTO verdict on the U.S. complaint on India's manufacturing export subsidies, if upheld by the WTO Appellate body, would strengthen the U.S. position in negotiating a trade deal with India.