BY KEITH JOHNSON
On the one hand, U.S. administrations beginning with George W. Bush and continuing under Barack Obama have indicated they need India as a strategic partner to help counter China’s growing influence. On the other hand, under Trump, Washington is now publicly browbeating India over the price of walnuts and Harley-Davidsons.
“The administration does not have an integrated policy toward India or anyone else for that matter,” said Ashley Tellis, an India expert at the Carnegie Endowment for International Peace.
U.S. national security officials have their own view of India’s place in America’s Indo-Pacific strategy and have built on the Obama administration’s efforts with closer defense cooperation, especially in the navy, and through increased arms sales. But U.S. trade officials, obsessed by trade deficits, have their own narrow agenda focused on prying open parts of the Indian market—a view entirely divorced from the bigger picture.
“The fruits of a schizophrenic policy are becoming evident,” said Carnegie’s Ashley Tellis.
“The fruits of a schizophrenic policy are becoming evident,” Tellis said.
Ahead of Trump’s big state visit on Feb. 24-25, U.S. trade officials led by Robert Lighthizer have been trying to secure a tiny trade breakthrough with India that will give Trump some sort of trade victory with a country long known for hardball negotiations and a reluctance to open its market.
The trade talks are the culmination of three years of escalating tension between the United States and India, which kicked off when the Trump administration levied tariffs on imports of steel and aluminum from India (and many other countries, especially allies). India eventually responded with higher tariffs on agricultural goods and restrictions on U.S. medical devices—prompting the United States to retaliate by removing India from a decades-old preferential trade program that gives developing economies a chance to export on favorable terms to the world’s biggest market. Just last week, the Trump administration went further, removing India from another program that shielded low-income countries from U.S. trade reprisals.
The Trump administration’s approach to trade talks with India, like those with China, Europe, and others, is driven by the president’s obsession with the trade balance: Countries that export more goods to America than they buy in return, he feels, are cheating the United States. India is a top 10 trading partner for America, and the United States runs a trade deficit of about $25 billion—a small fraction of the huge trade gap with China.
To remedy that, U.S. trade officials have tried to force open the Indian market to more U.S. exports, including farm goods, medical devices, and dairy products. The mini trade deal taking shape this month appears to include some Indian concessions on agricultural tariffs and a slight reduction in tariffs on industrial goods like motorcycles—but is a far cry from any sort of comprehensive trade agreement that would address big underlying issues like India’s penchant for protectionism or its treatment of data and e-commerce.
“I get the impression the idea is to just have some wins. We haven’t had any wins with India in a long time,” said Alyssa Ayres, an India and South Asia expert at the Council on Foreign Relations who called the small-bore nature of the current trade negotiations “dispiriting.”
The trade discussions come at a critical time for India, which faces an economic crunch. Unemployment is near a half-century high, and growth is sluggish; the International Monetary Fund just slashed India’s growth forecast to 4.8 percent this year—well below the growth levels the country needs to provide jobs for a young and growing population.
In response, rather than seeking to open the country to more trade and kick-start the competitiveness of India Inc., Narendra Modi’s administration has turned back to the old protectionist playbook of higher tariffs and a flirtation with autarky. (The latest budget includes a big increase in all sorts of tariffs, from footwear and toys to appliances and vehicles.) That skepticism of free trade was on full display when India late last year bailed out of the huge Regional Comprehensive Economic Partnership, a trade bloc that groups all of Asia’s big economies, including China. It’s part and parcel of Modi’s own “India first” brand of nationalism that mirrors Trump’s—which explains in part their personal affinity—but which is at odds with long-standing U.S. hopes of a freer Indian economy.
“India is feeling like they need to close down and protect their industries,” Ayres said. “But that is not how export economies in Asia have prospered.”
In years past, the United States would have tried to counter India’s protectionist turn, as the Bush and Obama administrations sought to do. But Trump has spent years attacking free trade in general and the U.S.-built international trading order in particular, repeatedly reaching for tariffs of his own to try to mollify U.S. industries like steel. That makes the current administration uniquely unsuited to coax India toward more constructive trade policies.
“The United States is hoist on its own petard—we are no longer free traders,” Tellis said.
And that trade myopia could have bigger consequences than just encouraging more protectionism: It could also jeopardize America’s increasingly close strategic relationship with a country that is the linchpin of the Indo-Pacific strategy to counter China.
In administrations past, especially under Obama Defense Secretary Ash Carter, little trade disputes were deliberately kept under the radar in order to prioritize the more important strategic and defense relationship; under Trump, fights over stents and walnuts take center stage in the bilateral relationship, essentially burying that Carter doctrine, said Kashish Parpiani, an Asia-Pacific expert at the Observer Research Foundation in Mumbai.
“Trump has upended all that,” said Kashish Parpiani of the Observer Research Foundation.
“Trump has upended all that,” he said.
The growing trade tensions haven’t derailed the strategic relationship yet, with defense ties with India growing even under Trump. The two countries are expected to announce a $2.5 billion deal for U.S. helicopters during Trump’s visit, and cooperation on important issues such as naval logistics and maritime domain awareness continues apace. The fear is that Trump’s transactional approach to relations even with allies—like shaking down South Korea and Japan for billions of dollars to offset the cost of U.S. troops stationed in the region—could bleed into the broader relationship with India.
“There is some fear that Trump is going to link the two: If there is no progress on trade, he might stall on” enhanced defense sales and cooperation, Parpiani said.
At issue is that, while a closer strategic relationship with India is a U.S. goal, it’s not clear that it’s an objective Trump shares, beyond his high-profile glad-handing with Modi.
He has denigrated the European Union (a pillar of trans-Atlantic security) for its alleged trade abuses, demanded more money from Asian allies, levied tariffs on NATO allies, and called into question U.S. commitments in the Middle East. When it comes to India, his main concerns seem to be forcing India to buy more American farm, dairy, and energy products—whatever the costs to the broader relationship.
“The United States has an Indo-Pacific policy where India is a huge building block, and that dimension is going on quite well. But Trump’s investment in that policy is unclear,” Tellis said.
That ambivalence was on clear display last week, when Philippine President Rodrigo Duterte told Trump that he was ending a decades-old agreement that allowed U.S. forces to use the Philippines as an advanced base in the Pacific. While the sudden announcement horrified U.S. defense officials, who will now find it harder to push back against China, Trump welcomed the rebuff because, he said, it will save some money.
“Trump supposedly has an Indo-Pacific policy, and then he tells the Philippines to go ahead and walk away” from defense cooperation, Tellis said.
Ultimately, during the trade talks and Trump’s visit, both Indian and U.S. officials share a similar goal: mollify Trump with small symbolic moves on issues like dairy access in order to avoid an unpredictable, potentially catastrophic decision. India’s willingness to play ball despite few concessions from Washington on areas that New Delhi wanted is because “India sees the writing on the wall,” Parpiani said.
Acquitted by the Senate in his impeachment probe, and having wrapped up some new trade arrangements favorable to the United States, Trump is unleashed. “This is the time when you appease him politically so that Trump 2.0 will be a little less aggressive—that is the calculation from the Indian perspective,” he said.
That balancing act of trying to offer Trump minor victories in order to avoid his wrath is becoming a standard playbook for countries around the world. China promised to buy more soybeans and oil to buy peace in the trade war; Japan, South Korea, and Europe have made token trade concessions to avoid deadly auto tariffs. None of those agreements have addressed long-standing, fundamental American trade concerns, and none have advanced U.S. security interests—but they were never meant to.
“If the president of the United States were truly strategic about what he wanted in terms of a renegotiation of our economic ties, we would be approaching the question of how we treat these countries in a very different way,” Tellis said.
“But everybody knows that what this president wants is not strategic: He has pet peeves, and those pet peeves need to be satisfied, and it doesn’t take much to satisfy them.”
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