Modi mulls lower tariffs, more imports to counter Trump’s threats

India’s government is evaluating options ranging from a trade deal, cutting tariffs and importing more goods from the US if US President Donald Trump follows through with threatened trade action.

Officials in the Narendra Modi-led administration have sketched out various scenarios to counter any steps a new Trump administration may take to narrow India’s trade surplus with the US which was $35.3 billion for the year ended March 31, people familiar with the matter said. US was India’s largest trading partner for the period, data from India’s commerce ministry show.

Among the options discussed, the government could buy more whiskey, steel and oil from the US, the people said, asking not to be identified as the talks are private. It could also reduce some import tariffs, with officials drawing up a list of likely products, such as bourbon whiskey and farm goods like pecan nuts, they said.

One of the proposals being considered is to reduce duties on good imported from US states that are politically important for the Republican party, one of the people said.

The plans under discussion are part of India’s larger strategy to avoid any confrontation with Trump, and also benefit from any potential US-China trade war, the people said. Bloomberg News reported Tuesday that New Delhi is set to take back at least 18,000 illegal Indian immigrants from the US to help placate the Trump administration.

An email seeking comments from the trade ministry spokesperson was not immediately answered. The plans have not been finalized and are still under discussions, the people said.

On his first day in office Monday, Trump said he would slap a 25 per cent tariff on Mexico and Canada by Feb. 1 while holding off on unveiling China-specific tariffs. He also threatened countries in the BRICS group of developing countries with increased tariffs.

Indian officials are also considering a limited trade deal with the US under one of its scenarios, people familiar with the matter said. New Delhi had tried unsuccessfully to implement this during the first Trump administration.

The plan under discussion would include reducing some “most-favored nation” tariffs, which are imposed on countries with which India doesn’t have a bilateral trade deal.

Here are more details of the scenarios being discussed, according to people familiar with the matter:

1) India could consider buying more goods from the US in sectors including soybean, dairy, vehicles, medical instruments, and aircrafts

2) Electronics, hi-tech machinery, textiles, footwear and chemicals among sectors to benefit if China slapped with higher tariffs by the US and curbs on access to advanced technology

3) India expects the new Trump administration to pressure the country on issues including data regulations, intellectual property rules and e-commerce

Across the board tariffs of 10 per cent-20 per cent on all countries would help boost India’s exports of auto components and metals