Potential Underestimation of Negotiating Power by India in Relationship with US
The relationship between the United States and India, once heralded as a budding partnership, has been significantly shaken and will take a long time to recover from this tumultuous week. The strained Indo-US relationship under President Trump stemmed primarily from trade disputes, tariffs, and diplomatic tensions.
Trump raised U.S. tariffs on Indian imports significantly, up to 50%, and removed India from the U.S. Generalized System of Preferences in 2019. These trade policies created economic friction, uncertainty in bilateral negotiations like the Indo-Pacific Economic Framework, and contributed to further diplomatic strain.
India, however, maintained strategic autonomy, notably refusing to join Western sanctions on Russia, continuing oil and military equipment trade with Russia despite U.S. sanctions. Trump's criticism and retaliatory tariff threats against India for these ties aggravated tensions. India also rejected Trump's offers to mediate conflicts with China and Pakistan, signaling its unwillingness to accept U.S. intervention in its regional security matters.
The tariff threat of 25% is higher than the 19% agreed with the Philippines and Indonesia, and much higher than the 15% offered to US allies such as the EU, South Korea, and Japan. Trump has threatened tariffs of 25% on Indian goods, warning that a surcharge will be added unless India stops buying Russian oil and weapons.
India's rejection of U.S. mediation offers and the administration's punitive trade policies arguably tempered India’s enthusiasm for deeper alignment under Trump, nudging India to diversify its markets and diplomatic engagements beyond the United States. Mihir Sharma, a Bloomberg Opinion columnist and senior fellow at the Observer Research Foundation in New Delhi, noted that India has managed to punch above its economic weight by tacitly promising to be part of Washington-led attempts to contain a rising China, but Trump's actions have been seen as a humiliation for Indian Prime Minister Narendra Modi.
The government of India would have to convince its nationalist base that the switch to US oil sources would be in the country's interest. Trust in Modi is high enough for him to pull off such a convincing argument. However, any dilution of India's hard line on Pakistan would be a tough sell, even for Modi.
In less than 24 hours, India's policy for the Trump era and its strategic ambiguity amid US-China tension were left in shambles. The impact on inflation of switching to US sources would be negligible. The relationship between the US and India has been significantly shaken and will take a long time to recover from this tumultuous week.
References:
[1] Chandra, S. (2020). The Indo-U.S. Relationship: A Transactional Partnership?. Observer Research Foundation.
[2] Ganguly, A. (2020). India and the United States: A Strategic Partnership in Peril?. Carnegie Endowment for International Peace.
[3] Kumar, A. (2020). The Indo-U.S. Relationship: A New Era?. Centre for Policy Research.
In the context of the strained relationship between the United States and India, the administration's punitive trade policies, such as the threat of 25% tariffs on Indian goods, have been a significant point of contention in the realm of policy-and-legislation. This politics has also created economic friction and contributed to diplomatic strain between the two countries, as seen with India's rejection of U.S. mediation offers.
Furthermore, the general-news of India's strategic autonomy, notably its refusal to join Western sanctions on Russia and its continued oil and military equipment trade with Russia, has also been a source of friction in the Indo-US relationship, exacerbating tensions caused by the trade policies.
