A ‘pro-America’ India could help New Delhi win over Trump

United States President-elect Donald Trump is staying true to his self-given moniker of “tariff man.” This time, he’s taking aim at some of the world’s fastest-growing major economies in the weeks before his inauguration.

Earlier this month, he singled out the BRICS nations, threatening them with 100% tariffs if they form a new currency or replace the US dollar with a different tender altogether.

India, a founding BRICS member, is powerful and central to the intergovernmental organization, that also features China and Russia among others. Like other countries, India has been targeted by Trump, who called New Delhi a “very big abuser” of the bilateral trading relationship during a campaign event in September.

Even during his first administration, Trump applied tariffs on steel and aluminum that set off a cascade of retaliatory moves. He eventually also stripped the country of preferential trade status, removing a designation that exempted billions of dollars’s worth of the country’s products from US tariffs and igniting anger among Indian officials.

But despite all that, the president-elect enjoys a warm personal relationship with Indian Prime Minister Narendra Modi. The two men praised each other enthusiastically four years ago, when the president visited Modi’s home state of Gujarat. Observers say that rapport is likely to serve India well during Trump’s second term.

New Delhi is an outlier within the group and that could put it in an advantageous position, particularly given its heft, to quash any talk of de-dollarization, he said.

The idea, a long-held ambition for some members, could in theory see the group move away from using the greenback and seek to build either a new currency or transition to another tender altogether. Using other currencies could allow member countries to reduce their dependence on the US dollar.

“Having Trump breathing down BRICS’ neck saying, ‘don’t go down that road,’ gives India more space to maneuver,” Pant added.

It allows India to say the group should tread carefully to avoid provoking a very reactive United States, Pant said.

India’s foreign minister Subrahmanyam Jaishankar said this month that India had no interest in weakening the US dollar.

‘Quite positive’

There is still considersable pro-Washington sentiment in the Indian capital. China, and the belief that the US is on a collision course with the Asian superpower, is driving the relationship between Washington and India, according to some observers.

“His first term was quite positive, and the relationship that he ended up having with Modi also worked well for India, and therefore there is a sense that the second term might not be as disruptive,” Pant said.

Modi and Trump burnished their personal ties during Trump’s first term. Modi was feted at a rally in Texas in September 2019 titled “Howdy Modi.” The favor was returned for President Trump in February 2020 when 125,000 people turned out for the “Namaste Trump” rally in Ahmedabad.

Michael Kugelman of the Wilson Center’s South Asian Institute in Annapolis, Maryland also believes that an incoming Trump administration may afford India some rapprochement compared with the Biden years, particularly over issues like Ukraine and human rights.

“The world views of Trump and Modi are much closer, they converge a lot more than the world views of Biden/Obama and Modi,” he said.

On Ukraine, he added, neither Trump nor Modi has criticized President Vladimir Putin for the invasion in 2022 and both have recently called for peace. Trump has said he would end the war in 24 hours, and Modi offered his help to broker peace when he visited Moscow in July.

Transactional ways

Yet that is not likely to totally absolve India from the occasional turbulence associated with a Trump administration.

A universal tariff of 10% threated by Trump would impact India, Kugelman said, in part because India enjoys a trade surplus with the US.

Trade between the two sides has heavily favored New Delhi, according to United States data. Over the past two years, the US has imported about twice as much as it has exported.

India is becoming an increasingly important manufacturing hub for companies such as Apple, especially as it seeks to build its supply chains outside China.

In the first 10 months of this year, the US has imported $73 billion from India, compared with the $35 billion it has exported to the country.

Kugelman and Pant agree that the trade imbalance would create headaches for New Delhi, but not ones that are insurmountable. Instead, it might make discussions about deals or policy more transactional.

“This is just how Trump rolls, so even strategic partners like New Delhi will have to adjust to that,” said Kugelman.

Trump is “a deal maker,” said Pant. “It’s always about give and take. So, the long-term approach to policy making has to give way to more ad hoc approaches … what’s the deal you can cut now, rather than looking five years down the line.”

Pant points to a 2018 waiver given to New Delhi by Washington over the Chabahar Port in Iran. The exemption was needed following the reimposition of sanctions on Iran. The restrictions forced all US companies, foreign firms and countries from doing business with Iran.

New Delhi had signed a 10-year, $500 billion agreement with Tehran to run and operate the port, which India sees as a vital trade route to Central Asia and Afghanistan bypassing its archrival Pakistan.

The waiver formed part of Donald Trump’s then South Asia policy. In a 2017 speech, he called on India to assist the US with more economic help to Afghanistan. He used highly beneficial trade between the two as a bargaining chip.

“If you are able to put your interests transparently, and if you’re able to do business with him, then you may not be as worse off,” Pant added.

India has demonstrated it is able to walk the fine line between staying on the good side of Trump while also pursuing its own interests. Time will tell if that can be replicated, but the view from New Delhi appears to be optimistic.