One thing is clear even in the country where the US slaps India with 50% tariffs, the highest of all countries ever, and pushing their relationship at the lowest moments over the years.
On Wednesday, the US announced a 25% tariff on India over Russian oil imports, bringing it to a total of 50%. New Delhi was one of the first to begin trade negotiations with Washington, DC, and surprised most experts as Trump and India’s prime minister Narendra Modi repeatedly praised each other’s friends in an official statement. Brazil is the only country facing tariffs as high as India.
“The breakdown of the trade negotiations was a surprise,” said Vina Najibla, vice president of strategy and research at the Asia-Pacific Foundation in Canada.
“This is a very difficult moment, perhaps the worst in their relationship for many years, putting India in a group of very small countries with the highest tariff rates without trade. They now need to find a way forward on some practical paths and rebuilding their trust,” Najibla said.
The 50% tariffs that begin three weeks later came as a shock, but there have been a series of events in the past few weeks that suggest disagreements between the two countries.
Last week, Trump threatened to call both countries a “dead economy” by New Delhi for purchasing Russian oil and weapons, threatening to emit frustration over the deadlock in trade talks.
The dead end of negotiations
Last year, bilateral trade between India and the US was around $21.2 billion, and India’s favor was around $460 billion. Modi has said in the past that it plans to double the trade between the two countries to more than $500 million over the next five years.
As part of the tariff negotiations, New Delhi has offered to remove taxes from US industrial products, saying it will increase defense and energy purchases, Reuters reported. He also offered to reduce the tax on the car, despite the strong car lobby being put under pressure at home.
However, they refused to rule out farm and dairy obligations, two politically sensitive sectors employing hundreds of millions of poor Indians, and similar stances as other countries like Canada.
And Farwa Armour, director of the South Asia Initiative at the Asian Association Policy Institute in New York, has a geopolitical layer in what was supposed to be a trade conversation.
What’s very public was the difference in perception of the end of the latest clash between India and the Pakistani president in May. Trump has repeatedly said he brokered a ceasefire. India has repeatedly said that Trump will not play a role in bringing the ceasefire, saying that Modi and Trump never spoke during the conflict.
Meanwhile, Pakistan has said it will nominate Trump for the Nobel Peace Prize, and so far has been trading with the US to explore key mineral and oil reserves in an effort to develop relations with the US after years of ambivalence under US President Joe Biden, Armour said.
All this has caused anxiety for New Delhi. “This will test India’s foreign policy,” Aamer said. “And even if we maintain ties with Russia, we’ll see them grow with the US,” he said.
New Delhi called the tariffs on Wednesday “unfair, unfair and unreasonable,” saying that Russia’s oil imports were based on the purpose of securing the country’s energy needs of 1.4 billion people.
But beyond that, “India doesn’t want to look weak,” Aamer said. “Because India has this global position and Modi has this global position, we must maintain our own position. We will maintain the stance that national security is driving foreign policy.”
Robert Rogoffsky, a professor of international trade at the Middlebury International Institute in Monterey, said he expects “very creative diplomacy” and “very creative diplomacy” as India and the US are trying to reset relations despite tensions.
“A strong person like Modi will inevitably lead to shifts and counter shifts,” he told Al Jazeera.
Adds instability
For now, India can focus on strengthening its bilateral trade agreement, according to Aamer, who signed with the UK last month and contracted with the European Union currently working on.
India is also trying to stabilize its ties with China. Just like Australia, Canada and Japan have done in recent months since Trump took office and hit allies with tariffs. Modi is scheduled to participate in the Shanghai Cooperative Organization Summit at the end of the month. It will be his first visit to China as the two countries faced off in the Galwan River Valley in 2020.
But the hit of trade from the US comes as an option for companies looking to add locations outside China, both when India was trying to position itself as a manufacturing hub.
For example, Apple said in April that all iPhones intended for sale in the US will be assembled in India by next year. Electronics are exempt from customs duties for now, but countries with a 50% tariff tag are not attractive to businesses. This “increases the instability and uncertainty that businesses have already felt due to all Trump’s tariffs,” Najibla said.
“Trump revealed he’s interested in the director, not the lighting of his friends.”
