Modi's Trump strategy sees quick concessions to avoid trade war

By Dan Strumpf, Shruti Srivastava and Sudhi Ranjan Sen

Few countries are moving faster than India to appease US President Donald Trump in an effort to head off a potentially devastating trade war.

In a matter of weeks, Prime Minister Narendra Modi has delivered a rapid series of concessions to the White House on issues core to Trump’s agenda, offering an early picture of how New Delhi plans to deal with the new president as he slaps tariffs on rivals and allies alike.

India’s latest accommodation came on Saturday, when Modi’s government unveiled the first-ever overhaul to its tariff regime, which included sweeping cuts to duties on imports from textiles to motorcycles. It follows New Delhi’s pledge to accept thousands of unlawful migrants from the US and maintain the US dollar as its trading currency.

The quick actions, coming in the absence of any specific new threat from Trump, underscore the more conciliatory mood that has taken hold in India as Trump’s second term gets underway. The approach marks a contrast from the harder line drawn by Modi during Trump’s first term, when warm ties between the two leaders weren’t enough to overcome trade impasses that led Washington to yank trading privileges for India.

Indian officials, speaking on condition of anonymity, say they are eager to preserve deepening ties in trade, defense and technology-sharing between the two nations, as well as bolster India’s status as a destination for foreign manufacturers leaving China. New Delhi has more to gain than lose by maintaining friendly ties with Trump, they said.

‘Doing Everything’

The Ministry of External Affairs didn’t immediately respond to an email sent after office hours.

“India is quite central to the US in every way, whether it’s the Indo-Pacific strategy as well as where to tell companies to go to avoid tariffs,” said Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis. “The risk of major tariffs on India is low, but it seems they’re doing everything they can to avoid tariffs.”

Governments around the world are racing to get ahead of protectionist moves by the US as Trump follows through with new tariffs on Canada, Mexico and China — raising new threats to global growth and roiling global markets. Already, South Korea has said it is considering buying more US food and energy, while Japan has said it is seeking stable energy supplies from Washington.

In Australia, Trade Minister Don Farrell has reached out to his US counterpart to organize a meeting, a spokesman for the minister said. Australia is keen to move quickly given the threat of tariffs on its exports of aluminum and copper.

India in particular has much to lose in any trade war with the Washington. The nation’s overall trade deficit is $78.1 billion — driven largely by an outsize energy-import bill — and it’s cushioned by a bilateral surplus with the US worth $35.3 billion in the fiscal year that ended last March.

Tighter Ties

In recent years, India and the US have bolstered cooperation in areas including defense, technology-sharing and nuclear cooperation, as Washington looks to cultivate New Delhi as as regional bulwark against China. India has won new factories from US companies such as Apple Inc. and Micron Technology Inc.

Trump last week said he expects India’s prime minister to visit the White House this month, making him one of the first foreign leaders to visit Washington since Trump took office.

Yet Trump has repeatedly singled out India and its high trade barriers, and has pledged reciprocal duties on the South Asian country. Modi’s decision to reduce levies on heavy-duty motorcycles targets a US export that Trump has repeatedly said gets unfair treatment: Bikes made by Milwaukee-based Harley-Davidson Inc., which for years grappled with India’s complex tariff regime.

In declaring India “not a tariff king,” Finance Secretary Tuhin Kanta Pandey echoed a nickname that Trump bestowed on the country during his first term.

Sticking Points

“The changes made in tariff structure either resolve, or show the intent of resolving, issues which have been raised by Trump in India’s context,” said Amitendu Palit, an economist specializing in international trade and investment at the National University of Singapore.

Other sticking points remain between the two countries. India continues to import large volumes of its crude oil from Russia, which the US has sanctioned for its invasion of Ukraine.

Separately, the US indicted an Indian government official last year on allegations of organizing a conspiracy to murder an American citizen on US soil. India has said it’s recommended legal action against an individual it believes is involved in the plot.

One risk for India in appeasing Trump is that it risks courting additional demands from the US leader, Palit said.

“Trump’s trajectory is if you agree to him once, you can’t be sure that it’s done forever, because he will he will come back asking for a higher price,” he said. “That’s a challenge.”