India thought it was past the rough patch. A trade deal was in sight, the bonhomie with Washington was warming up, and the worst of the tariff tantrums seemed to be behind us.
Then came the US Supreme Court judgment, a fresh round of Section 301 investigations, and a Middle East conflict throwing global energy markets into a tailspin, and suddenly, New Delhi finds itself back at the starting line, squinting at a finish tape that keeps moving.
Mukesh Aghi, President of the US-India Strategic Partnership Forum, spoke to THE WEEK about the latest on the bilateral relationship between the two big economies. Here are some excerpts:
Q: How does the Supreme Court judgment change things between India and the US when it comes to the trade deal? Talks have been postponed. How will it evolve?
The knee-jerk approach on tariff — if I don't like somebody, I'll put 10 per cent more or 25 per cent more, that leverage is gone. And I think that provides a sense of a little more stability in trade negotiations.
Now, India is in a precarious position because the Trump administration has put in 15% tariff all across and India is at 18 per cent. And at the same time, the administration has also invoked 301 (a US trade law which allows it to retaliate against foreign trade practices it finds unfair and discriminatory), which will have an impact.
So I think what India is saying to the US is, we need to understand what direction you want to go. And then we can move forward from that perspective.
Q: I thought we were past the misunderstandings of last year and were moving forward. But again, these kinds of investigations. What does it mean that the US would still want to kind of continue with this whole game?
I think the Indian side is looking for is a sense of predictability. Because if your understanding is that it's going to be 18 per cent, then why are you invoking 301, which can take it to a much higher number later on? Or is this 301 invocation on your side to put pressure on India to settle on 18 per cent? Those questions are still very open.
You also have to understand that you have opposition in India (for a deal at 18 per cent), and if it shifts again, it leaves the government in a very embarrassing position.
So I think the position India is taking is, ‘tell us what's the final word?’ Is it going to be 15 per cent where you have the power only for 150 days, then you have to go to the Congress? Or is it 18 per cent, which we have agreed upon? Or will that move into 301k later on and put pressure on India? So I think those issues have to be sorted out before India can move forward and sign a trade deal with the US.
Q: If Trump has been so temperamental and changing the tariff rates so many times over the last one year, well, shouldn't India also, now that we've got a window of opportunity (with) the Supreme Court judgment and the fact that some of these rates can only be applied for 150 days max, play the waiting game or try to get something better out of it?
Well, India does not have the leverage. And we saw that on the Russian tariff. And I think India’s (only) leverage was that they didn't react. They didn't provoke.
My advice to India is, don't react. Don't provoke. Get a clear understanding from this administration in the US: ‘What is the final word so we can move forward?’
Q: Trade is one thing, but now this war muddies the waters in a major way because India, either way you look at it, is caught in a bind. How much of an impact do you think India will suffer? Is it going to be a prolonged period of angst for India?
Well, you know, you have to understand that this is not just about geopolitics. It goes beyond that. (Tomorrow) The US can withdraw and say, ‘Okay, I've accomplished my objectives, destroyed the missiles, destroyed all the air coverage.’
But it's the regional countries which will feel the impact.
We saw the Iranians bombing the financial centres, airports in Dubai and other areas. Yes, India got two oil tankers come out unscathed, and I think more will come out. But the impact on India is going to be quite a bit because our dependence on energy, especially LNG from Qatar, has had an impact.
India may find other sources, but it'll be much more expensive. And so overall, I would say that India is walking a very fine balance — not upsetting the Persians, not upsetting the Trump administration, managing its relationship with the Arab countries.
We have 9 million Indians who are working in the region itself. So India is in a tough position at the moment, but I think I have to compliment the government, especially the foreign minister, who has basically walked a very tight line and managed this so far with less impact on India.
