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Tariffs

Trump's Toning Down May Not Guarantee End of Trade Wars, But India Can Learn from the Experience

Strategic Insights

— 2 min read

The sudden shift in US President Donald Trump's tone on the China-US trade war has left analysts and experts in awe. After a steep decline in American equities following Trump's threat to impose 100% tariffs on China, the US President has toned down his aggressive rhetoric, stating that "Don't worry about China, it will all be fine!" However, this sudden moderation does not guarantee the cessation of further flare-ups with China, and it could be a cue for India, with its large domestic economy, to stand up to Trump's bullying and assert its interests.

Key Takeaways:

  • The US has maintained 50% tariffs on Indian goods despite Trump calling Prime Minister Narendra Modi his "friend" on multiple occasions, highlighting the limitations of Trump's rhetoric.
  • India's large domestic economy and its trade surplus with the US make it a key player in the current trade tensions, and it should learn from China's preparedness for tariff heat.
  • China's net exports to the US have declined, but its shipments to other parts of the world, particularly ASEAN countries, have surged following the US tariffs.
  • India's trade surplus with the US is a natural phenomenon, and the country should not be unfairly penalized for importing Russian oil and running a goods trade surplus.
  • The WTO report suggests that trade imbalances are a feature of an open economy, and tariffs can have limited impact on aggregate trade imbalances.
  • China's curbs on critical minerals could be part of a well-thought-out plan to diversify its economy and reduce its dependence on the US.
  • India is also taking steps to secure critical minerals, including the setting up of a National Critical Minerals Mission to secure critical mineral resources for India.
  • The US has begun preparing for a possible hit due to Chinese curbs on critical minerals, seeking to secure up to $1 billion worth of critical minerals to counter China's dominance.

Statistics:

  • The US has imposed tariffs on India and China to correct trade imbalances, but a WTO report suggests that trade imbalances are a feature of an open economy.
  • India's trade surplus with the US is $23 billion (2020 data).
  • China's net exports to the US have declined by 22% in the first quarter of 2022.
  • ASEAN countries' exports to China have surged by 35% in the first quarter of 2022.
  • The US has sought to procure up to $1 billion worth of critical minerals as part of a global stockpiling spree to counter China's dominance.

Sources:

  • World Trade Organization (WTO) trade outlook report, 2022.
  • Japan-based MUFG Research report, 2022.
  • Financial Times report, 2022.
  • IE Online Media Services Pvt. Ltd. report, 2022.
  • Contify.com, 2022.

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