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Info Service on WTO and Trade Issues (Aug25/01) Geneva, 31 Jul (D. Ravi Kanth) — United States President Donald Trump on 30 July announced a tariff of 25% on all Indian exports to the American market plus an unspecified “penalty” on India for buying “a vast majority of their military equipment from Russia” along with their being “Russia’s largest buyer of energy”, seemingly setting new terms of trade for countries on how they must trade with the US, said people familiar with the development. For the first time in the history of global trade, President Trump has reinforced a direct link between trade on the one side, and security-related issues like defense and energy purchases on the other, as he did with the European Union on 27 July, said people familiar with the development. Writing in his Truth Social media website, President Trump said: “Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non-monetary Trade Barriers of any Country.” Further, he said India has “always bought a vast majority of their military equipment from Russia, and are Russia’s largest buyer of ENERGY, along with China, at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE – ALL THINGS NOT GOOD!” He added: “INDIA WILL THEREFORE BE PAYING A TARIFF OF 25%, PLUS A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST. THANK YOU FOR YOUR ATTENTION TO THIS MATTER. MAGA!” President Trump went on to ratchet up pressure on India on inexplicable grounds. He issued a second post on his Truth Social media website hitting out at India and Russia for their strong defence and energy relationship. President Trump said on 30 July, “I don’t care what India does with Russia. They can take their dead economies down together, for all I care.” Continuing with his allegedly irrational statement, President Trump said, “We have done very little business with India, their Tariffs are too high, among the highest in the World.” “Likewise, Russia and the USA do almost no business together. Let’s keep it that way, and tell Medvedev, the failed former President of Russia, who thinks he’s still President, to watch his words. He’s entering very dangerous territory!” The US also threatened to impose 50% tariffs on Brazilian goods largely on political grounds which have nothing to do with trade. Incidentally, Brazil does not have any trade surplus with the US. In the same breath, President Trump said the US is going to sell more oil and energy to Pakistan, suggesting that Islamabad can sell the same oil to India. US-KOREA DEAL On 30 July, President Trump announced that “the United States of America has agreed to a Full and Complete Trade Deal with the Republic of Korea.” Like Japan, the European Union, Vietnam, and Indonesia, he said that “the Deal is that South Korea will give to the United States $350 Billion Dollars for Investments owned and controlled by the United States, and selected by myself, as President.” “Additionally, South Korea will purchase $100 Billion Dollars of LNG, or other Energy products and, further, South Korea has agreed to invest a large sum of money for their Investment purposes,” President Trump touted. “It is also agreed that South Korea will be completely OPEN TO TRADE with the United States, and that they will accept American products including Cars and Trucks, Agriculture, etc. for zero tariff treatment, while the US has agreed to a Tariff for South Korea of 15%. America will not be charged a Tariff.” Continuing his allegedly illegal tariff assault, President Trump announced a 50% tariff on copper. Earlier, he had imposed a 50% tariff on steel and aluminium products. The term MAGA refers to “Make America Great Again”. During a meeting with President Trump in February, India’s Prime Minister Narendra Modi announced an ambitious equation in which he said MAGA+MIGA (Make India Great Again) is equal to “MEGA Partnership for Prosperity.” Subsequently, India claimed that it will conclude an ambitious trade agreement with the US within six months, which aims to accomplish a two-way trade turnover of $500 billion in five years, from well below $200 billion at this juncture. India held several rounds of bilateral discussions with the US, though it rarely shared the details, particularly the asks from the US in different sectors, said a former Indian trade official, who asked not to be quoted. Only last week, the Indian commerce minister Piyush Goyal reportedly said the talks between India and the US are going well, indicating the possibility of an interim agreement. On 26 July, Prof Arvind Panagariya, chairman of the 16th Finance Commission of India, told a news agency in New York that “the proposed India-US trade agreement will be a big shot in the arm and make India a very attractive location for investors and result in a lot of liberalisation by the country.” “A lot of the current things that are underway are very exciting,” Panagariya said, adding, “in particular, I want to mention the US-India trade agreement that is being negotiated. Also, the India-European Union agreement.” Once the India-US trade deal happens, the one with the European Union will also happen and “that door will open very conveniently,” he said. With these two trade deals, “India will have an open market with the European Union, with the United States. These are the two largest markets. For any future investor, that makes India a very attractive location because effectively, the friction that is there on the border will melt away, and that is going to be an absolute game changer,” Panagariya said, according to the news agency report. Six months after that ambitious pledge, Prime Minister Modi appears to find that the “MEGA Partnership for Prosperity” that he had envisaged along with President Trump is being upended by the US President himself, said a former senior official of the Indian commerce ministry, who asked not to be identified. President Trump has seemingly caused a jolt by taking India by surprise, said a former Indian trade official who later worked at the World Trade Organization. On seemingly inexplicable grounds, President Trump announced a 25% tariff on all Indian goods, in addition to the sectoral tariffs of 50% on steel and aluminium, and 25% on automobiles and auto parts. Besides, he said that India will be subjected to a “penalty” because of its longstanding purchases of military equipment and energy from Russia. Meanwhile, the Indian Ministry of Commerce and Industry issued a statement in response to President Trump’s announcement, saying that it is studying the implications of the US tariffs. “The Government has taken note of a statement by the US President on bilateral trade. The Government is studying its implications. India and the US have been engaged in negotiations on concluding a fair, balanced and mutually beneficial bilateral trade agreement over the last few months. We remain committed to that objective,” the statement said. “The Government attaches the utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, and MSMEs [micro, small, and medium enterprises],” the statement emphasized. “The Government will take all steps necessary to secure our national interest, as has been the case with other trade agreements, including the latest Comprehensive Economic and Trade Agreement with the UK,” it added. ADVERSE EFFECTS Referring to President Trump’s announcement of tariffs against India, a former Indian government tariff expert, who preferred not to be quoted, said a “25% tariff is going to hit everything.” He said, “Everything. I mean, all our textiles and garments, leather products, electronics, gems and jewelry, gold, diamonds, electric machinery, and shrimp – everything.” According to the tariff expert, the burden will ultimately fall on the American consumer. In 2019, during President Trump’s first term in office, his US Trade Representative (USTR), Ambassador Robert Lighthizer, terminated the Generalized System of Preferences (GSP) scheme, which affected several items such as textiles, gems and jewelry and even handicrafts, to the tune of a loss of $6 billion. Given the tariff differentials, such as a 20% tariff on Vietnamese exports to the US, a 19% tariff on Indonesian goods entering the US, and a tariff to be announced on Bangladesh’s exports of textiles to the US, India could lose its competitive edge in the American market. Another senior Indian official, who later served as India’s trade envoy to the WTO, said “it’s a surprise because India has been negotiating for so long, and at least they should have put it off for the time being.” In agriculture, it appears that Washington has demanded the entry into India of genetically modified (GM) farm products and several other sensitive farm products that would have jeopardized the livelihoods of 800 million small farmers, who are being assisted through food stamps, said people familiar with the development. “Moreover, you know, today I am unable to determine holistically what would be the effect of the US tariffs on India, because I must know the tariffs on all countries which compete with India, for instance, on textiles and garments,” said a former Indian trade official who served as a deputy director-general at the WTO. BRICS A former Indian commerce secretary said, “one only hopes that compulsions of the objective forces will make India bold enough not only to participate more actively in the initiatives already afoot [such as BRICS], but also in making its own contribution to the process.” The official said, “India cannot remain a bystander. It has got to participate more actively in the history that is being made before our eyes.” Another former Indian trade official said the “BRICS’ collective effort is to infuse a new meaning into it.” “True to the pragmatic style of their leaders, particularly China, the “ruling terminology” is not being jettisoned,” the official said. “But the [BRICS’] collective effort is directed toward transcending the perversions systematically built into that terminology by neo-imperialism,” the official said. He said the BRICS’ effort is an attempt at infusing “a new content” based on “a cooperative, non-judgmental, pragmatic content through material interventions such as BRI [Belt and Road Initiative], bilateral trade, technology and investment initiatives and an incipient alternative to the current, exploitative international payment system.” The official acknowledged that “China is the mainspring of such initiatives,” adding, “that is simply a reflection of China’s economic and technological heft.” +
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