While imports from the US have grown faster than Indian exports to the US, President Donald Trump is not satisfied. He has slammed India, seeking to drive a better bargain to push American goods, while seeking to restrict the entry of goods and software professionals into the US.
Ahead of his visit, Trump made his intentions clear, accusing India of “hitting” the US “very hard” with high import duties. He had previously called India “tariff king” as his administration drove a hard bargain to restore preferential tariffs through the generalised system of preferences (GSP) scheme, a facility that was withdrawn last June.
For the last 18 months, India has been seeking to buy peace with the US, with negotiations picking up pace after the Narendra Modi government returned to office last May. Despite the Trump-Modi chemistry and commerce and industry minister Piyush Goyal’s equations with US Trade Representative Robert Lighthizer, the two sides have failed to clinch a deal, which was “almost ready” when Modi was in New York last September.
At the time, medical devices were the sticking point. With no breakthrough in sight, the government agreed to carve out a special dispensation to benefit American stents and knee implants. It also decided to lower import duty on high-end bikes and food products like almonds and apples that were part of India’s “retaliatory tariffs” in response to higher customs duty on its aluminium and steel shipments to the US. Lighthizer and his team were, however, not happy with what was expected to be a $10-billion trade deal.
India had also signalled its willingness to engage in a free trade agreement with the US after it decided to disengage from the Regional Comprehensive Economic Partnership (RCEP) to create what would have been a mega Asia-Pacific trade bloc.
Officials said American ambitions had grown over the last few months, prompting India to seek and “accommodate” more demands. For instance, the government agreed to allow the entry of distillers dried grain with solubles, the controversial genetically modified animal feed. American negotiators began pressing for lower tariffs too. The story was repeated across several other product segments and the Americans were seen to be raising new demands and reopening what were seen to be settled issues.
Around January, it was decided that it was crucial to draw the red lines and Modi himself reportedly made the stand clear internally.