PM Modi's Diplomatic Move: Avoiding Trump's Calls Amid Tariff Tensions

As the world's largest democracies, India and the United States have shared a complex and multifaceted relationship over the years. While they have cooperated on various global issues, their bilateral trade relations have been marred by tensions and disagreements. In recent years, the relationship between the two nations has been put to the test, particularly in the context of tariffs and trade policies. The trade tensions between India and the US can be traced back to 2018, when the Trump administration imposed tariffs on steel and aluminum imports from India, citing national security concerns. India retaliated by imposing tariffs on several US goods, including almonds, apples, and walnuts. The situation escalated further in 2019, when the US withdrew India's preferential trade status under the Generalized System of Preferences (GSP) program, which allowed India to export goods to the US duty-free. Protectionism vs. Free Trade The tariff tensions between India and the US reflect fundamentally different approaches to trade policy. The Trump administration has been a vocal proponent of protectionism, seeking to protect American industries and jobs from foreign competition. In contrast, India has traditionally been a proponent of free trade, seeking to promote economic growth and development through increased trade and investment. The differing approaches to trade policy have led to a stalemate in negotiations between the two countries. The US has demanded greater market access for its goods and services, while India has sought to protect its domestic industries and farmers. A Chilly Relationship The tensions between India and the US have not been limited to trade policy alone. In 2020, reports emerged that Indian Prime Minister Narendra Modi had avoided calls from US President Donald Trump, citing scheduling conflicts. The incident sparked concerns about the state of the relationship between the two leaders and the impact on bilateral ties. The reported snub was seen as a significant departure from the warm relations that had developed between Modi and Trump in the early years of the Trump presidency. The incident highlighted the fragility of the relationship and the potential for misunderstandings and miscommunications to escalate into larger conflicts.

• The trade tensions between India and the US have significant implications for the global economy and international trade relations.
• The differing approaches to trade policy reflect fundamentally different values and priorities.
• The reported incident of PM Modi avoiding calls from President Trump highlights the fragility of the relationship and the need for effective communication and diplomacy.

In this context, it is essential to understand the complexities and nuances of the relationship between India and the US, and to explore the ways in which they can work together to promote economic growth, development, and cooperation.

The Tariff Tension Between India and the US

The Report: Modi Avoided Trump's Calls

Implications of Modi's Diplomatic Move

What's Next for India-US Relations?

Frequently Asked Questions (FAQ)

What sparked the tariff tensions between India and the US?

The trade tensions between India and the US have been escalating over the past few years, with tariffs being a major bone of contention. To understand the roots of this issue, we need to delve into the role of the Generalized System of Preferences (GSP) and its withdrawal by the US. What is the Generalized System of Preferences (GSP)? The GSP is a preferential tariff system that allows developing countries to export goods to the US at zero or reduced tariffs. This program was established by the US in 1974 to promote economic growth and development in developing countries. The GSP provides duty-free access to the US market for over 3,500 products from 120 beneficiary countries, including India. India's Benefits under GSP India was one of the largest beneficiaries of the GSP program, with exports worth over $5.6 billion enjoying duty-free access to the US market in 2018. The GSP program provided a significant competitive advantage to Indian exporters, particularly in sectors such as textiles, gems, and jewelry, and handicrafts. India's exports to the US under GSP included products such as:

• Textiles and apparel
• Gems and jewelry
• Handicrafts
• Pharmaceuticals
• Engineering goods

US Withdrawal of GSP Benefits to India In March 2019, the US announced its decision to withdraw GSP benefits to India, citing concerns over India's trade practices and lack of access to its markets. The US Trade Representative (USTR) alleged that India had failed to provide adequate market access to US goods and services, particularly in the areas of medical devices, dairy products, and agricultural goods. The USTR also expressed concerns over India's tariffs on US goods, which it claimed were higher than those imposed by other countries. The US withdrawal of GSP benefits to India was seen as a major setback for Indian exporters, who would now have to pay duties on their exports to the US. Impact of GSP Withdrawal on India-US Trade Relations The withdrawal of GSP benefits has had significant implications for India-US trade relations. India has retaliated by imposing tariffs on 28 US products, including almonds, apples, and walnuts, worth around $240 million. The trade tensions between the two countries have escalated, with both sides imposing tariffs on each other's goods. The GSP withdrawal has also had a broader impact on the global trading system, with other countries such as China, Japan, and the EU taking note of the US's aggressive trade stance. As the world's two largest democracies, India and the US need to find a mutually beneficial solution to their trade differences, lest it affects the global economy and trade relations.

How has the trade tension affected Indian businesses?

The ongoing trade tensions between the United States and China have sent ripples across the global economy, and India is no exception. Indian businesses, particularly exporters, have been affected significantly, with far-reaching consequences for the country's economy. Impact on Indian Exporters Indian exporters have been caught in the crossfire of the trade war between the US and China. With the US imposing tariffs on Chinese goods, many Indian exporters who rely on China for raw materials or intermediate goods have seen their costs increase. This has made their products less competitive in the global market, leading to a decline in exports. Additionally, the strengthening of the US dollar has made Indian exports more expensive, further reducing demand. The impact is particularly severe in sectors such as:

• Textiles and Apparel: India's textile and apparel industry is heavily dependent on Chinese raw materials. The increase in tariffs has led to a rise in production costs, making Indian exports less competitive.
• Pharmaceuticals: Indian pharmaceutical companies rely on China for active pharmaceutical ingredients (APIs). The trade tensions have disrupted the supply chain, leading to shortages and increased costs.
• Electronics: India's electronics industry is heavily dependent on Chinese components. The tariffs have increased the cost of production, making Indian electronics less competitive in the global market.

Impact on the Indian Economy The impact of the trade tensions on Indian businesses has had a ripple effect on the country's economy as a whole. The decline in exports has led to a slowdown in economic growth, with the GDP growth rate slowing down to 5% in the first quarter of 2020. The trade tensions have also led to a decline in foreign investment, as investors become cautious about investing in a country whose economy is heavily dependent on exports. This has led to a decline in the value of the Indian rupee, making imports more expensive and further fuelling inflation. Furthermore, the trade tensions have also affected India's trade relationships with other countries. The country's decision to impose retaliatory tariffs on US goods has led to a decline in trade relations with the US, its largest trade partner. Way Forward In order to mitigate the impact of the trade tensions, the Indian government has announced several measures to support exporters, including:

• Export Incentives: The government has announced incentives for exporters, including a rebate on taxes and duties.
• Infrastructure Development: The government is investing in infrastructure development, including ports and logistics, to improve the competitiveness of Indian exports.
• Diversification: The government is encouraging exporters to diversify their markets and reduce their dependence on China and the US.

While these measures are a step in the right direction, more needs to be done to support Indian businesses and mitigate the impact of the trade tensions. As the trade war continues to evolve, it remains to be seen how Indian businesses will adapt and respond to the changing landscape.

Is this incident a sign of a larger diplomatic rift between India and the US?

The recent incident between India and the US has sparked concerns about a potential diplomatic rift between the two nations. As the world watches, it's essential to analyze the broader implications of this incident on India-US relations and global politics. A Brief Background The incident in question revolves around the detention and subsequent release of an Indian diplomat in the US. The diplomat, Devyani Khobragade, was arrested on charges of visa fraud and mistreating her domestic worker. The incident sparked outrage in India, with many calling it a grave violation of diplomatic protocol. Ripple Effects on India-US Relations This incident has significant implications for India-US relations, which have been touted as a key partnership in the 21st century. The US is one of India's largest trading partners, and the two countries have cooperated on various issues, including counter-terrorism and nuclear energy. However, this incident has exposed underlying tensions and trust issues between the two nations.

• Trust Deficit: The incident has highlighted a trust deficit between India and the US. India feels that the US has failed to respect its diplomatic protocols, while the US believes India is not doing enough to address human rights concerns.
• Economic Implications: The incident may have economic implications, with India considering retaliatory measures against US businesses operating in the country. This could impact bilateral trade and investment, which is valued at over $100 billion.
• Strategic Partnerships: The incident may also impact strategic partnerships between India and the US, including defense cooperation and counter-terrorism initiatives. India may reassess its reliance on the US and explore alternative partnerships.

Global Politics and the Rise of Multipolarity The incident also has broader implications for global politics. The rise of emerging powers like India and China is challenging the traditional dominance of the US and other Western powers. This incident may be seen as a symbol of the shifting balance of power in international relations.

• Multipolarity: The incident highlights the growing multipolarity of international relations, where emerging powers are asserting their interests and challenging traditional norms.
• BRICS and Alternative Institutions: The incident may strengthen the resolve of emerging powers to create alternative institutions and forums, such as the BRICS grouping, to promote their interests and challenge Western dominance.
• New Global Governance: The incident underscores the need for new global governance structures that take into account the rising influence of emerging powers and promote more equitable and inclusive decision-making processes.

Conclusion The recent incident between India and the US is a significant development with far-reaching implications for India-US relations and global politics. As the world moves towards a more multipolar order, it's essential for nations to engage in diplomacy and dialogue to address their differences and promote cooperation. The incident serves as a reminder that even the closest of partnerships can be fragile and that constant effort is required to build trust and understanding.