Now that the world has decided to settle with American President Donald Trump and his “Liberation Day” economics, we must check where major economies stand.
China (PRC) initially scorned talk of any settlement on Trump’s terms and was waiting to watch what happens when America falls into recession. Will the American consumer remain hooked to cheap goods made in China? Will the American government sue for peace? Will they defy WTO which is not likely to rule in favour of Trumponomics? China’s dream was to unite the Global South (and possibly even Europe) and get America to roll back The Great (tariff) Wall of America. When things did not go that way, China and USA held talks in the cooler climes of Switzerland and announced 115% reduction in tariffs on either side. More deals are likely as these talks continue
India has been positioning itself to be an early winner in Trump’s second term in office. There is much back-slapping and talk of “early mutual wins”. The contours of the trade deal between USA and India are still not clear. But America has identified what it wishes to export more to India.
There is crude oil and LNG from export terminals in Texas and Louisiana for which India has a great appetite. Logistics will however be a challenge, and we could see Indian buyers swapping cargo on the high seas with Europe or Asia.
Agriculture is being hard sold by America. They wish to sell us corn (maize), soya bean, apples, almonds, dairy products and poultry. A strong Indian lobby, which will bleat “protect our small farmers” and “no to Genetically Modified crops”, will put its might behind any concessions here. The Government of India will have to convince the lobbyists, farmer unions et al that the promised doubling of farmer incomes cannot happen without opening up to the outside world. The best antidote for the disease of Complacency is a dose of healthy Competition.
Then there are items adding to the glamour quotient. Defence procurement (fighter jets, missiles et al), Boeing aircraft for Air India, IndiGo, Akasa, etc; Sikorsky helicopters and automobiles from Tesla and Harley Davidson. Many companies will be looking to understand the optimal route to market in either country.
India looks to export large numbers of iPhones, laptops, textiles, pharmaceuticals and jewellery besides conventional exports of products and services to balance the trade deficit. Also expect Indian businesses to invest more in USA as they look for nearshoring opportunities. This looks more plausible than ever before as companies look to build resilience in their supply chains
The US-India trade deal is being negotiated between two hard-nosed business-oriented negotiators. We are likely to see trial balloons floated in both countries to check how the media and the public react to the concessions that must be inevitably made.
The EU needs fundamental reforms if it must be perceived as an economic unit worth negotiating with. Too much tinkering at the sidelines, too much regulation (Brussels!) and the ever present need to modernize the armies to take on the Russian bear affect the community. Sooner than later, Europe must get up, dust its clothes and stand on its own two feet. Sensible economic measures would call for a united stand and cooperation with trade blocs around the world.
“Reciprocal” tariffs can degenerate into an eye for an eye which will make the whole world blind. India is instead offering an Apple for an apple. The first is an iPhone assembled in the Tata facilities in southern India, while the latter is the fruit of the efforts of the Washington state farmer.
Let us hope that a Win Win approach characterises the next steps in this trade war.
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Feedback
Naimish Dave
CFO & Executive Director, Aarkay instruments Pvt. Ltd., Mumbai, India
It’s an engaging read and captures a lot of the current trade scenario, but I have a slightly different view, especially on the US-China dynamic and India’s positioning.
The idea that the world has “settled” with Trump’s economic nationalism might be overstating it. China hasn’t exactly come to the table with concessions; if anything, it has been playing for time – diversifying trade, pushing domestic consumption, and insulating its supply chains. The recent tariff rollback talks (assuming they’re real) seem more like tactical recalibrations, not strategic submission. It’s telling that just a week ago, Trump’s rhetoric did a U-turn – suddenly softening on China, while taking a sharper tone with India.
That volte face speaks volumes about relative negotiating power. China, with its manufacturing scale, financial clout, and global trade linkages, simply commands more leverage. India, despite its promise and progress, is still in a different weight class. Trump’s message to Apple – not to over-focus on India and to reverse sourcing decisions – is a reminder that we’re not yet irreplaceable in global supply chains. So, while the “early win” narrative for India sounds good, the reality is that our bargaining power is still evolving, not entrenched.
On agriculture too, I’m a bit skeptical of the argument that opening our doors to US exports is the way to double farmer incomes. The issues in Indian agriculture – fragmented landholdings, supply chain gaps, low productivity – aren’t going to be solved by importing cheaper (and often subsidized) American produce. That could deepen distress, not fix it. Healthy competition is great, but only if both sides are standing on an equal footing.
True reciprocity requires strength on both sides, not just shared optimism. And in any negotiation, especially with hard-nosed counterparts, understanding where we hold leverage – and where we don’t – is half the game
Piyush Patil
Program Maker, X TU Delft, The Netherlands
Very insightful read! Agree with the point of EU’s urgent need for policy reforms to position itself as a strong contender in wake of the Trade wars. Otherwise, will be termed as laggards soon enough 🙂
Uday Mulmulay
Pune, India
Good article – cause and effect scenarios explained. Time will tell. In my opinion – much has been written on its effect on China. Except for price rise, inflation nothing much has been written on the US economy and its effect on their population
Abhishek Khudania
Client Associates, Mumbai, India
Good easy informative read.
