India should keep at it with the US trade deal

If for nothing else, you gotta hand it to Donald Trump for being besotted by his own unique brand of trade economics that goes against much of US business. After the Supreme Court told the president that he chose the wrong tool for his trade policy, the self-styled Trade King has already taken the hint to impose 15% globalised tariffs.

His regime now seeks other means to bend trading partners to its will. The law allows Trump to impose tariffs to uphold 'national security' and counteract 'unfair trade practices,' but as time-bound measures and subject to congressional oversight. The emergency powers struck down have yielded a rich haul of trade deals that countries are unlikely to back out of, given Trump's access to other tariff measures.

Continuation of protectionist trade will depend on Republican control of Congress in a midterm election year. But US consumers, who ultimately pick up the tab, are not revolting on a scale to bring this tariff edifice down. Yet.


If the verdict has accomplished anything, it's to limit Trump's use of unpredictability as leverage. US tariffs can't be used anywhere, anytime, for any reason. Negotiations with the US will continue, with slightly more wiggle room on the other side of the table. India should be able to set its market access boundaries more forcefully. Commitments made in concluded negotiations are likely to be maintained, assuming the India-US trade deal dealt with low-hanging fruit before moving on to knottier issues.

Indian negotiators will be informed of the Trump regime's options over tariffs through its own experience with taxing transfers of Indian assets between overseas entities. GoI amended the law to introduce retrospective tax after the Supreme Court ruled in favour of Vodafone. The law was revoked a decade later after international arbitration losses. So, Trump's is hardly the 'original sin'. He has statutory authority to pursue foreign affairs through tariffs. So, it still makes sense for India to seek out a negotiated settlement through trade.