Is Trump’s Tariff Turmoil Good News For India?

medium119872612As advertised, Trump presidency has thrown disruptive balls in global geo-economic playgrounds. And yet the most disruptive move of them all may come today with Trump’s announcement of “reciprocal tariffs” — retaliatory tariff-marking irrespective of the political colour of the trade partner, ally or adversary. Separately, on Thursday 25% tariff is set to be imposed on all cars and car parts being imported into US. Thus, tariffs make a comeback in American policy toolkit after several decades of free-trade evangelism when US swapped political allegiance for market access.Pre-World War I, US was a highly transactional major power. It tailgated British (more accurately British Indian) expeditions in Asia to expand trade footprints — most famously with China in the aftermath of opium wars. At the same time, it zealously protected its own spheres of influence in the Americas against British overreach, like in Venezuela in the late 19th century. It was starkly illustrative that the largest trade and tech partner of the world’s first communist state, Soviet Russia, was America!It was only after the two world wars that jargons like “rules-based order” and “values” really started shaping US engagement with the world. Initially as an optically attractive contrast to rival USSR during the Cold War, and then as a bit of an ideological indulgence post its victory in that contest.US navy protected the world’s sea lanes for expansion of trade, the US dollar architecture underpinned a fast-growing global economy. US traded political allegiance (of Western Europe and Eastern Asia) for non-reciprocal market access. Historian Hal Brandsdescribed US policy after the Cold War as the idea that “military hegemony would tame potential challengers until economic integration transformed them.”But that unipolar moment has passed. Emergence of China and Russia’s litigation to reclaim some of its past glories have restarted history (with due regards to Francis Fukuyama). If the global US-sponsored architecture is fracturing, it isn’t all down to Trump, but because the earlier field – a bipolar system pitting US against a staunch rival or a unipolar era of US dominance – is no longer in play. Instead, the world ismean-reverting to being multipolar with spheres of influence and credible contestations to American primacy.India missed out on Asia’s spectacular rise in the 20th century — primarily due to its inability to swap economic benefits for political allegiance. India’s unique set of challenges made it tougher to consider such a “paired trade”. Those challenges remain, and more pertinently, US isn’t offering that trade anymore. Trump is interested more in straight swaps — trading one set of economic concessions (on tariffs for example) for another set of economic concessions (also on tariffs). Ukraine’s Zelenskyy found that out, painfully publicly. Trump refused to sign an economic deal (on rare earth minerals) in lieu of a politico-military blank cheque. Instead, he demanded politico-military concessions from Ukraine that would enable a deal with Putin.For a larger, richer India, this is an easier trade to enter. Buying more oil and gas from US is lot cheaper than militarising Quad. Tariff concessions on Harley Davidson bikes are further up India’s alley than joining Western sanctions on Russia. A bilateral trade agreement to protect India’s large exports to US is well within Indian absorptive capacities.As US withdraws from its expansive global engagements, it opens up space for other powers. China is a natural beneficiary. But China’s forays will be contested, especially by powers considered more benign than the Middle Kingdom. Sometimes on its own, like in the Indian subcontinent, sometimes in coalition with like-minded powers like Japan, India can extend its influence in East Asia and Africa in ways that were not possible under the looming shadows of American dollars and navy ships.Over the last decade, India has mostly got its big strategic choices right. Belt and Road Initiative – check. RCEP – check. Sanctions on Russia post Ukraine war – check. In each case, India chose a side decisively without monkey-balancing positions. On BRI, India was the only country conspicuously absent at launch. On RCEP, India stonewalled pressures from strategic allies like Japan and Australia. On Russia, India’s stance of remaining deeply engaged with Putin in face of withering Western (and some domestic) critique is now being advocated by Washington. It’s not luck. A mix of competent policymaking and bigger economic sinews gives India the flexibility to make hard choices.Where we have often faltered has been execution. Whether on domestic policy, crucial military reorganisation or delivering on projects in the neighbourhood. On each of them, while India’s gotten better, it trails China by a very long margin. This is the biggest constraint today.India has been a trading nation for millennia. A more transactional world looking at things through the prism of deals works eminently to our advantage.The writer is chief investment officer at an asset and wealth management firm