US under Trump

For a person credited with a short memory span, it is ominous that US President Donald Trump has publicly raised the issue of high import duty levied by India on Harley-Davidson motorcycles at least thrice in a month. The Trump dispensation’s frontloading of burgeoning trade deficit with India is at variance with the approach of the Bush and Obama administrations. They tolerated the trade deficit with India in the larger interest of the growing strategic partnership between the two countries. India in the bargain became a customer for US-Israeli defence hardware and its navy has ventured to show the flag in areas where US and India security interests intersect.

But it is in economics and trade where an emerging divergence under the Trump administration threatens to politically damage the Modi government. Trade disputes commonly occur in all trading partnerships but get resolved through sustained conversations. But the US Trade Representative’s (USTR) targeting of India’s entire trade policy at the WTO is of a much larger magnitude; even the Washington visit by Foreign Secretary Vijay Gokhale failed to postpone the action. An impending hit to India Inc comes on top of PM Modi’s inability to crack some of the bread and butter issues of the NRIs and aspiring constituency. A proposed US legislation will make it harder to recruit Indian workers while there is continuing mismatch between US visa and US social security regimes.

India’s response has been to demonstrate its usefulness to the US in the security sphere by pushing for the maiden “2+2” dialogue format which ensures a more effective synthesisation of strategic policy. But the geo-strategic headwinds for India are currently unfavourable: Trump’s rapprochement with North Korea precludes antagonising China while he will be inclined to let Pakistan off the hook to secure its cooperation for talks with the Taliban. In an election year where PM Modi’s foreign policy will be critically appraised, the government will be severely tested to present its gains to the electorate. Trump has invited PM Modi to visit the US later this year. That might be the occasion to attempt a turnaround in trade ties.