Donald Trump's change of stance
US President Donald Trump has made a dramatic announcement on social media, stating that the retaliatory tariff imposed on India has been reduced from 50 percent to 18 percent. He also said that, after a long period of uncertainty, the two countries have reached an understanding on a trade agreement. The unilateral announcement by the US came after a phone conversation between Trump and Indian Prime Minister Narendra Modi. Soon after, Modi thanked the United States through a social media post. Union Commerce Minister Piyush Goyal later confirmed that India and the US have agreed on a trade deal.
Earlier, the overall tariff was 50 percent, made up of a 25 percent retaliatory duty and another 25 percent charge imposed by the US over India’s purchase of Russian oil. This has now been reduced to 18 percent, effectively removing the 25 percent additional tax linked to Russian oil purchases. Trump claimed that India has agreed to stop buying Russian oil, though India has not publicly responded to this claim. Trump also said that India would instead buy oil from Europe and Venezuela. He further stated that India would reduce tariffs on US goods to zero. However, the Indian government has not clearly stated its position on these matters.
India is not expected to reduce tariffs on US agricultural products to zero, as such a move could trigger large-scale protests by farmers in the country. India had already made it clear to the US before trade talks that it would not compromise on this issue. It is also evident that the trade agreement between India and the European Union, which has created a new equation in global trade dominated by the US and China, played a key role in prompting Trump to rethink his stance. When two democratic blocs representing a combined population of 200 crore people come together, it has the potential to significantly reshape the global supply chain. In a way, if Trump had not initiated a tariff war, the India-EU agreement may not have happened so quickly.
Europe’s strategic move to reduce its dependence on the US and China, along with India’s efforts to become a global manufacturing hub, came together in the success of the India-EU agreement. At present, India’s textile exports to the European market account for only about three percent. Estimates suggest that this could rise to 20-25 percent through the agreement. Similar gains are expected in other sectors as well. Trump appears to have changed his stance suddenly after foreseeing that the world order dominated by the US and China could weaken, and that India and the European Union could rise in the global market.