Trade Rhetoric

A ‘never been stronger’ India-US relationship. That is how Donald Trump described the ties between the two countries during the latest bilateral meeting with Narendra Modi. Bonhomie rules as India so far has not got much stick despite having a trade surplus with the US. For now Trump is busy taking potshots at China as the US has a $350 billion trade deficit with the world’s largest trading power. In comparison, the US trade deficit with India is 1/10th that gargantuan figure.

Bilateral trade between the countries totalled $115 billion in 2016. Steel, textiles and precious gems, especially diamonds make up a large chunk of India’s exports to the US, while it has been a steady importer of machinery and electronics. India enjoys a trade surplus, due to its high import tariff rates. Not that it has entirely escaped Trump’s attention. Earlier this year and in the latest meeting, he talked about bridging this gap through a "fair and reciprocal" trade relationship. While FDI inflow was $60 billion in FY17, higher than FY16’s $56 billion, Trump’s intent of imposing a tariff on cheap goods entering the US could also mean lower FDI inflow to the exporting countries in the coming days.

Balancing ‘trade abuses’ could create it’s own issues for India. Already the restriction on H-1B visas is turning out to be a sore point. Trump’s “buy American, hire American” resolve to retain jobs for US citizens over Indian IT employees will test the partnership. While Trump and Modi have been calling each other “true friends” over Twitter, the budding friendship does not really eclipse the barriers present. It will soon be evident if rhetoric can trump ground reality.