Introducing Inquisitorial by Indianaut, a long-form newsletter where we explain and analyze important stories stemming out of the Indian entrepreneurial ecosystem & economy. New articles every Saturday & Sunday.
In 2016, Republican President Donald J. Trump was elected to office after eight long years of the Obama Administration. This election sparked many controversies about the maintenance of the sanctity of democratic elections and his tenure till now has witnessed some of the most serious allegations made against a POTUS in the history of the United States. However, Trump's hardline approach in both domestic as well as international politics in the past 4 years has resulted in both fruition as well as diplomatic setbacks.
The cornerstone of President Trump’s agenda was to put ‘America First’, bring manufacturing jobs back to America, and ‘Make America Great Again’. Trump, throughout his tenure, has mocked and criticized past administrations and corporations for failing to protect American interests and allowing ‘hard’ and ‘soft’ power to shift from America to Asia. As Donald J. Trump’s first-term comes to a conclusion, in this two-part series, we at Indianaut wish to highlight how relations between the US and India have fared under President Trump. These articles analyze the Trump Administration's approach towards India in matters of international security and economy.
Part 1: On Trump’s Economic Policies vis-à-vis India
Part 2: On Trump’s Foreign Policies vis-à-vis India
India and the US have been by far stable trading partners to each other. In the last 20 years, the US-India partnership has blossomed. India was seen as a major destination for American corporations to initially shift their customer services operations, hire skilled engineers both to augment the company’s presence in India, support their staff around the globe, and even hire talent to work in their US-based headquarters. As India’s manufacturing sector matured, India also started exporting goods to the US markets.
The total trade of goods & services was estimated to be around $142.6 billion in 2018. Exports were $58.7 billion; imports were $83.9 billion. The U.S. goods and services trade deficit with India was $25.2 billion in 2018. India is currently the 9th largest goods trading partner with $87.9 billion in total (two way) goods trade during 2018. Goods exports totaled $33.5 billion; goods imports totaled $54.3 billion. The U.S. goods trade deficit with India was $20.8 billion in 2018. The major goods which were imported from the USA were precious metal and stone ($11 billion), pharmaceuticals ($6.3 billion), machinery ($3.3 billion), mineral fuels ($3.2 billion), and vehicles ($2.8 billion). The major items which were exported to the USA were precious metal and stone (diamonds) ($7.9 billion), mineral fuels ($6.7 billion), aircraft ($2.9 billion), machinery ($2.2 billion), and organic chemicals ($1.6 billion).
(See more: TRADE FIGURES between the Countries)
Considering the trend of stronger relations, one could have thought the relations ought to have improved with the ascent of Trump to the presidency, who has much more common ideology with our PM Modi than the liberal internationalist Obama ever did. Also, the fact that Trump was trying to downsize the dependency of the world on China should have played the matter more into the hands of India.
Trump’s regime began with flashy steps as promised in his campaign like dropping out of the Trans-Pacific Partnership & renegotiating the NAFTA which resulted in bitter relations between the USA with its trading partners. These steps were indicative of what could be expected in the future. In no time India was dubbed as the “Tariff King” and the Trump administration imposed national security tariffs of 25% on $761 million worth of steel & 10% on $382 million of aluminum imported from India. Trump publicly called out India for its high tariffs especially on completely-built units (CBU) Harley-Davidson motorcycles. India retaliated with tariffs in June 2019 targeting iconic American products with about 28 products like apples, almonds, cashews, etc from the US, which was then followed by the US revoking India’s preferential status under GSP.
Though India, did formally appeal against the US in WTO in June 2019, the US officially removed India from its tariff concession system i.e. GSP (Generalized System of Preferences) with the argument that India is a G-20 member & it accounts for at least 0.5% of global trade and changing its status from developing to a developed economy which means that India will no longer receive preference by US tariff for countervailing duties and it is a big blow to India though authorities might say something elsewhere the initial response of the government was that India is a rising economic power & they don’t need any special treatment but the ground report is different. The special status has impacted India with nearly $5.8 billion of India’s exports or more than 12% of exports to the US in 2017. In 2018, the US was India’s largest export destination at 16% of total exports, & second-largest source of imports after China at 6.3% of total imports. But in 2019, India accounted for a measly 2.09% of US exports & 2.30% of total US imports. So the damage done is totally clear.
The trade war didn’t escalate to US-China trade war levels and both parties agreed to resolve their issues covering about $10 billion in bilateral trade. India’s preferential status under GSP was reinstated which would make exports in the US trade-free again. In return, India had to change its policy regarding the access of US agricultural goods in the Indian market and change its price caps on US pharmaceutical products.
The biggest ramification for India lied in Trump’s immigration restrictions. The H-1B Visa Program gives the freedom to U.S. companies to hire foreign workers for certain occupations. The industry which hires the most is the Tech industry where computer science workers add to around three-quarters of those with the visa with majorly favoring the Indians between 2007 & 2017, a disproportionate share of immigrants were from India & it was surprising to know that more Indians received the visa than the nationals of the next five countries combined.
This issue has been pretty sensitive to both the democracies and the previous terms have played a role in expanding its progress where Bill Clinton in its term called for an increase in the cap in 2000; 2004 came & George W. Bush signed the bill for extending the visa cap into law, and the trend continued where Barak Obama also further expanded the number of people eligible for the visas. Though NRIs would have that with the increasing Indian's influence in the elections the trend might favor them but Trump did exactly the opposite. With his trend of continuously thrashing the Obama administration on its immigration policy & his promise of slashing the rate of immigration & he did exactly like that on June 22, he suspended the visas until 2021. Trump has suspended the F-1 & J-1 visa programs which allow non-national students to study in the U.S.
Both countries have been supporting each other to combat the pandemic. In the early days of the pandemic when countries were struggling to find therapeutic drugs that could be effective against the pandemic, India provided anti-malarial drug hydroxychloroquine to the US when it was dealing with a major blow to its medical system to which even the POTUS appreciated it by tweeting about this & this wasn’t a one-way trend going on in return the US also helped India by donating ventilators which helped the country by bridging the shortage of life-saving devices in the country & also a care fund of $2.9 billion which also received a good appreciation by the national leader. Currently, several Indian companies are manufacturing experimental antiviral drug Remdesivir developed by US-based pharmaceutical company Gilead and supplying it to countries around the globe. Several Indian pharmaceuticals are participating in developing Covid-19 vaccines and gearing up for producing them when the same receive regulatory approval.
Only time will tell whether this bonhomie continues in the post-Covid world. Both countries have pushed towards increasing manufacturing jobs in their respective countries and move their supply chains away from China. Both countries have had issues with China in the recent past. While the USA’s differences have been related to China’s economic policies and their support for the North Korean regime, India’s differences have been of geopolitical nature. It’ll be interesting if these common differences will push the two countries to work together and present a united front to China. With US elections also coming in the picture, in the next few days we will see if Modi’s call for ‘Ab ki baar Trump Sarkar’ helps Donald Trump seal a second term or Democrats win and bring a paradigm shift in US-India relations.
Paras Jatana is currently pursuing PGDM from SVKM's Narsee Monjee Institute of Management Studies (NMIMS) and is a B.Com (P.) graduate from the University of Lucknow.