The amusement and annoyance over his coarse theatrics, threats on X, and delusions of winning a Nobel mask the real danger: Donald Trump may set a nasty template that other countries may find tempting. A matrix that could be refined and referred to well after he is tamed or gone.
If the US escapes inflation as exporters across the world slash their prices, its revenues from reciprocal tariffs swells, no clear court verdict emerges on the legality of tariff actions and, meanwhile, giants like TSMC and Apple commit, even if grudgingly, investments in the US, the Trump model, though inimical in a fragmented world, could fascinate others.
This would then prevent a neat break from today's steep tariffs, and delay the return to a new equilibrium that lies somewhere between a fast-fading globalised world and the present one haunted by a spectre of protectionism. When hints on social media and executive orders commingle every week, and no one knows how long global trade could be in a state of flux, how should India plan?
In Trump's world view, the once natural ties between India, the largest democracy, and America, the oldest democracy, no longer matter. Unlike his predecessors, he may not perceive India as a counterweight to China. And, even post- Trump, the relation between the two countries may be more transactional than it has ever been in history.
In such a pay-for-play association, India must back its exporters - particularly the small and medium-sized companies impacted by the tariffs - to tide over the uncertainty, and preserve their toehold in the US markets. Else, these smaller players with no cheap and easy access to finance and lacking the resources to set up bases in African and Latin American countries to route their shipments to the US, may end up losing their presence forever in the US market to other countries.
Trump tariffs may not be crushing for India. While labour-intensive businesses like gems and jewellery, textiles, and footwear are badly hurt, major exports like refined petroleum products, pharma and electronics are unaffected. Trades like textiles could have still struggled to absorb a 25% tariff hike through a combination of cost cuts, price reduction and negotiations with US buyers and retailers. But a 50% punitive tariff, pushing the total tariff burden to around 60%, puts them at an absolute disadvantage to exporters from countries like Vietnam.
A specific, temporary package for exporters in Trump tariff-affected sectors - perhaps a subsidy on their exports to the US, along with reviving the arrangement of concessional bank loans with interest subvention where GoI pays part of the interest - would not dent central finances significantly, but could help many small factories, employing millions, to stay afloat. It should be made unambiguously clear that such a package will be withdrawn if a deal is struck or US courts strike down the outrageous tariffs. With Washington choosing to disregard WTO conventions, it matters little whether an explicit financial support is against the global rules of trade.
The risk is that the urgency may be overlooked, thanks to the comparatively small shares of some of these activities in total exports and GDP. Bureaucratic and political nonchalance could also stem from 'high' GDP growth numbers arrived by the ministry of statistics through a dense calculation, a larger-than-estimated consumption boost from GST cut, and expectation that the impact on current account deficit (trade deficit with inflows like NRI remittances) would be lesser than the dip in exports because part of imports is re-exported, and a reduced export would lower imports too. But these are fleeting comforts - GST cuts, following lower income-tax, is a signal that GoI is betting more on consumption than capex by corporate India.
More than current account, a bigger and unstated fear - far-fetched to some - is the question on 'capital account': can New Delhi's volatile and unpredictable relationship with Washington, and brewing ties with China, cast a shadow on FDI and portfolio investments from the US into India?
India covers its gap in current account deficit - excess of imports over exports - with surplus in capital flows. It would be a stress on the rupee, reserves and, eventually, on the economy if capital inflows slow down. If this, indeed, figures somewhere in the realm of possibility, New Delhi must confront a trickier question: will India open its doors to Chinese capital - investments that typically have strings attached - to overcome any capital shortfall?
India may cross the river by touching the stones, but must remember that Trump's policy paroxysms have no parallel in recent history. It's wrong to compare Trump's moves with the sweeping 1930 Smoot-Hawley tariffs to protect US farmers and businesses, sparking a global trade war. Rather, it's reminiscent of Napoleon's disastrous 'Continental System' that forbade France's allies to trade with Britain. In a world that looks far less innocent 200 years later, liaisons are more uncertain.
If the US escapes inflation as exporters across the world slash their prices, its revenues from reciprocal tariffs swells, no clear court verdict emerges on the legality of tariff actions and, meanwhile, giants like TSMC and Apple commit, even if grudgingly, investments in the US, the Trump model, though inimical in a fragmented world, could fascinate others.
This would then prevent a neat break from today's steep tariffs, and delay the return to a new equilibrium that lies somewhere between a fast-fading globalised world and the present one haunted by a spectre of protectionism. When hints on social media and executive orders commingle every week, and no one knows how long global trade could be in a state of flux, how should India plan?
In Trump's world view, the once natural ties between India, the largest democracy, and America, the oldest democracy, no longer matter. Unlike his predecessors, he may not perceive India as a counterweight to China. And, even post- Trump, the relation between the two countries may be more transactional than it has ever been in history.
In such a pay-for-play association, India must back its exporters - particularly the small and medium-sized companies impacted by the tariffs - to tide over the uncertainty, and preserve their toehold in the US markets. Else, these smaller players with no cheap and easy access to finance and lacking the resources to set up bases in African and Latin American countries to route their shipments to the US, may end up losing their presence forever in the US market to other countries.
Trump tariffs may not be crushing for India. While labour-intensive businesses like gems and jewellery, textiles, and footwear are badly hurt, major exports like refined petroleum products, pharma and electronics are unaffected. Trades like textiles could have still struggled to absorb a 25% tariff hike through a combination of cost cuts, price reduction and negotiations with US buyers and retailers. But a 50% punitive tariff, pushing the total tariff burden to around 60%, puts them at an absolute disadvantage to exporters from countries like Vietnam.
A specific, temporary package for exporters in Trump tariff-affected sectors - perhaps a subsidy on their exports to the US, along with reviving the arrangement of concessional bank loans with interest subvention where GoI pays part of the interest - would not dent central finances significantly, but could help many small factories, employing millions, to stay afloat. It should be made unambiguously clear that such a package will be withdrawn if a deal is struck or US courts strike down the outrageous tariffs. With Washington choosing to disregard WTO conventions, it matters little whether an explicit financial support is against the global rules of trade.
The risk is that the urgency may be overlooked, thanks to the comparatively small shares of some of these activities in total exports and GDP. Bureaucratic and political nonchalance could also stem from 'high' GDP growth numbers arrived by the ministry of statistics through a dense calculation, a larger-than-estimated consumption boost from GST cut, and expectation that the impact on current account deficit (trade deficit with inflows like NRI remittances) would be lesser than the dip in exports because part of imports is re-exported, and a reduced export would lower imports too. But these are fleeting comforts - GST cuts, following lower income-tax, is a signal that GoI is betting more on consumption than capex by corporate India.
More than current account, a bigger and unstated fear - far-fetched to some - is the question on 'capital account': can New Delhi's volatile and unpredictable relationship with Washington, and brewing ties with China, cast a shadow on FDI and portfolio investments from the US into India?
India covers its gap in current account deficit - excess of imports over exports - with surplus in capital flows. It would be a stress on the rupee, reserves and, eventually, on the economy if capital inflows slow down. If this, indeed, figures somewhere in the realm of possibility, New Delhi must confront a trickier question: will India open its doors to Chinese capital - investments that typically have strings attached - to overcome any capital shortfall?
India may cross the river by touching the stones, but must remember that Trump's policy paroxysms have no parallel in recent history. It's wrong to compare Trump's moves with the sweeping 1930 Smoot-Hawley tariffs to protect US farmers and businesses, sparking a global trade war. Rather, it's reminiscent of Napoleon's disastrous 'Continental System' that forbade France's allies to trade with Britain. In a world that looks far less innocent 200 years later, liaisons are more uncertain.
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