In a confusing scenario, the US has announced tariff cuts on Indian goods from 50 to 18 per cent with immediate effect. The announcement by President Trump was immediately welcomed by Prime Minister Narendra Modi, but questions remain. For one, a formal agreement is yet to be announced. Related documents have not been finalized or released. Trump has a habit of blowing hot and cold. More surprisingly, he has announced that India would fully halt Russian imports and shift to supplies of the US-negotiated Venezuelan oil, and that India would drop trade barriers to zero on American goods. India, he says, would commit to purchases from the US to over $500 billion dollars. Overall, perceptions here are that Trump, who talked to the Indian PM on phone, has muscle-flexed India into making compromises. Modi’s expression of gratitude to Trump is significantly silent on a shift from Russian to Venezuelan oil. Analysts note that this is not a fully-sealed pact and could be subject to changes.
Several issues add to the present confusion. While India has reduced its oil dependence on Russia and turned significantly to the US for oil imports to fuel our production lines and transportation requirements, an abrupt halt to supplies from Russia could disrupt supply chains. The Reliance refinery, for instance, has committed itself to buy 1,50,000 barrels of crude a day from Russia from this month. Notably, India managed to beat inflationary trends of late by resorting to purchasing Russian crude at low prices, beating US sanctions on Russia subsequent to its invasion of Ukraine. This caused Trump’s ire, leading to imposition of the 50 per cent tariffs on goods exported to America from here. The present announcement by the US means Trump has achieved what he had sought from India and found a huge market here for the “looted Venezuelan oil. But, India’s bilateral trade with the US would see a spike. The present level is of $200 billion, of which India’s exports from the US is only of $50 billion. What goes from here to the US are coal, technological purchases as in IT software, and agricultural products. The overall impact of such policy shifts on the Indian economy remains to be seen.
Trump is a hard nut to crack. He has his mood swings. Yet, his word is law in the US and beyond. How the present scenario shapes up will be known over a period of time. The US under Trump is increasingly getting hostile to India and the Indians settled there. His regulations during the present term are already working to the disadvantage of Indian techies. They power the US computer industry, which accounts for a quarter of the country’s trade sector value, but their life is getting increasingly miserable due to governmental arm-twisting. Techies who come to India on vacation wait endlessly for a return visa; and more often than not, this is rejected, putting them in a state of uncertainty about their future. Indians in the US are getting increasingly isolated in the public sphere, under Trump, and many are entertaining thoughts of a return to their homeland for good.
