By Shivaji Sarkar
India should take decisive steps to protect its interests against the looming threat of US tariff actions by implementing a dual approach—minimizing economic reliance on the US while advocating for its withdrawal from the WTO. This transition could elevate India as a pioneer in the Global South’s separation from major power economies, necessitating a bold, innovative strategy and extensive trade network expansions.
Additionally, the evolving geopolitical landscape requires careful consideration. As US President Donald Trump and Russian President Vladimir Putin strengthen their ties, the ramifications for Ukraine could be profound, especially with Trump criticizing Zelensky for postponing elections. If US backing diminishes, can Ukraine maintain its defenses? NATO allies are left contemplating their future as the US economy wavers, facing an unpredictable landscape that could usher in a period of European instability.
The US stands as the second-largest goods exporter globally, trailing only China. In 2022, US goods exports amounted to $2.1 trillion, marking a 17.5 percent increase ($307.3 billion) from the previous year, representing 8.5 percent of the world’s total exports. It ranks as the world’s largest economy by nominal GDP and the second-largest by purchasing power parity (PPP). In 2024, it holds the sixth-highest nominal GDP per capita and ranks eighth by GDP per capita based on PPP. The US constituted approximately 26 percent of the global economy in nominal terms in 2023, and about 15.5 percent in terms of PPP.
In this context, disengaging from the US presents a significant challenge. For any developing nation, ignoring the US is exceedingly difficult, even in light of Trump’s overt threats to impose “reciprocal” tariffs. This approach signals that the US can unilaterally implement high tariffs with minimal recourse for protest, which may be seen as a form of intimidation. Furthermore, Trump has claimed that an ineffective single-engine F-35 stealth fighter would be discontinued, based on his erroneous belief that the trade balance favors India.
He has also criticized the Indian tax framework as a high barrier to trade. The World Trade Organization (WTO), and its predecessor GATT, allows nations to protect their trade and business interests. Nonetheless, Trump argues that a uniform Goods and Services Tax (GST) constitutes a barrier. Indian lawmakers may now come to the realization that they were advised against implementing the GST, which dismantled various local taxes that previously acted as barriers to trade. The move towards a one-nation GST may now come under scrutiny, with policymakers reevaluating its impact on domestic trade and revenue collection. The perception of such developments as interference in domestic affairs poses a significant question.
Should Trump’s assertions prevail, he could jeopardize the domestic economies of numerous countries to enhance US corporate profits. The deadline of April 1 looms, by which time Trump will unveil his new tax proposal alongside his reciprocity framework. India, as a sovereign state, doesn’t need to comply with every direct order, but it must carefully consider its next steps to avoid potential backlash.
The US continues to record trade deficits with several crucial partners. The largest deficiency is with China, which reached about $279 billion in 2023, reflecting significant reliance on Chinese-manufactured goods. Mexico follows with an approximate $152 billion deficit, mainly attracted by automotive parts and vehicles. Additionally, Vietnam contributes notably to the US trade deficit, with figures around $104 billion.
In 2024, the US recorded a trade deficit of $45.7 billion with India, reflective of a 5.4 percent increase from 2023. During the same year, the US exported goods valued at $41.8 billion to India, showing a 3.4 percent rise compared to 2023. Imports from India amounted to $87.4 billion, indicating a 4.5 percent increase from the previous year. From April to December 2024, the US encountered a merchandise trade deficit of $210.77 billion. In the preceding year, the US goods and services deficit surged by $133.5 billion, or 17 percent, compared to 2023.
In 2023, the United States exported $36.33 billion in services to India, resulting in a trade surplus of $6.47 billion for the US, as India imported approximately $29.86 billion worth of services during that year. By December 2024, the US is estimated to have exported $32.66 billion in services to India, with a total of $251.94 billion in services between April and November.
Major US exports to India encompass machinery, nuclear reactors, and boilers at $3.29 billion, aircraft and spacecraft at $3 billion, electrical and electronic equipment at $2.21 billion, and optical, photo, technical, and medical apparatus valued at $1.99 billion. The US goods trade deficit with India stands at $45.7 billion. Conversely, from April to November 2024, the US recorded a services trade surplus of $119.48 billion with India.
Even under President Joe Biden, the US has exerted pressure on India. In November 2024, India’s primary imports from the US included petroleum, pearls, precious stones, coal, and electrical machinery, most of which are available locally at competitive prices. India frequently finds itself compromising to serve US interests. As a developing nation, India minimally benefits from these arrangements and should not react excessively to Trump’s criticisms.
The US maintains a surplus in services, exporting more than it imports on a global scale. In 2022, the US trade-to-GDP ratio was 27 percent, lower than the global average of 63 percent. This indicates that, relative to other countries, the US economy relies less on international trade for growth, suggesting a higher degree of self-sufficiency.
India must recalibrate its strategies, recognizing itself as a nation facing multiple hurdles while seeking global alliances. Concurrently, it should advocate for WTO reforms, particularly reconsidering the special and differential treatment clause to ensure equitable global trade practices. Reclaiming its leadership role among developing nations is essential for India, as it highlights the growing divide between the wealthy and the impoverished on a global scale. India should also confidently assert that the US, with its trade surpluses, bears a greater responsibility to offer concessions rather than demand them.—INFA
(Copyright, India News & Feature Alliance)
New Delhi
22 February 2025
