New Delhi: 

“It’s the economy, stupid!” was the defining message in the 1992 US presidential campaign. Coined by Bill Clinton’s campaign manager, James Carville, the postulation rings true today like never before. 

US President Donald Trump has reset the global trade order bringing in a new alarming sense of unilateralism to tariffs. As the world paces to decode the impact of the Trump tariff card, it is clear that multilateralism has been buried down under. Under the weight of the tariff tsunami, world trade bodies are scurrying for cover.  

The Trump order has not come totally unexpected but what is an element of total surprise is the acute element of bilateralism that would determine the trade reset among nations. 

Navigating Trump: The Modi Template? 

Purely from the political prism, the Modi government would showcase the moderate rate with pharma exemption as a winning formula. And, truth be told, tariff politics isn’t the kind that would lighten Modi’s appeal in the domestic constituency.  His supporters might actually be right in claiming that the Modi template in dealing with the new age Trump, ever keen to conquer anything in his sight, is the perfect template for the world to emulate. That should actually please Trump as well, for he gets what he wants without being seen as the big villain in India like in the rest of the world. 

India: Political Impact

Coming back to the political impact in India, the opposition would likely launch a blistering attack on what it calls “sell out to America.” It would cite many other nations’ resolve to hit back with reciprocal tariffs and taunt Modi’s bro-mance having failed to merit an exemption. And that even while announcing the tariff penalty last night, Trump mentioned Modi as a friend while in the same breath lambasting what he called India’s very high tariff wall. 

The Modi government is on record to argue that it is on top of things. Addressing the News9 Global Summit – India Edition – Piyush Goyal, Union commerce and industry minister, last Saturday, said, “India is on track”. What this essentially means is that the government is working overtime to close the bilateral trade deal due September later this year and not get unduly perturbed by the latest tariff order. 

The Union government would not make any statement that indicates any retaliatory action. The government is quite pleased with the personal chemistry of the two leaders and would canvass that as the selling point in the overall Indo-American ties. So, don’t expect any noise around how Trump is the new tariff landlord. Instead, stay tuned for more of MAGA and MIGA leading to MEGA partnership. 

With no big election round the corner in India, the tariff is unlikely to snowball into an election issue. Bihar goes to polls later this year when the first draft of the bi-lateral treaty would be showcased. 

Riled Leadership? 

From China to Vietnam and Japan to South Korea, the new tariff card would mean a set back to their economies, at least in the short to medium term, while their serving leaders would find it difficult to take the dressing down, especially in their domestic constituencies. 

What would the Trump tariff diktat mean to India under Prime Minister Narendra Modi? The economic impact, from initial estimates, would be in the range of $30 to 35 billion dollars annually, which again would come down once we formally hear of pharmaceutical being excluded. It is interesting to note that while Trump slapped a 26 per cent tariff on India, he left out pharmaceuticals simply because generics from India shape up the health of the American citizen. Smart politics from Trump and a leeway to the Modi government. In the net, the economic fallout is not going to be that debilitating while both countries are moving rapidly on the bilateral trade pact. 

Many in the establishment here, however, would have ideally preferred an exclusion for India from the tariff stranglehold. 

The consolation, however, being that overall the tariffs imposed on India are moderate in comparison to China, Vietnam, Japan and neighbouring countries in the south Asia region. 

 Mark Trump’s domestic and international ratings in the days to come as they hit the roof. A new template for power has just been announced. 

The tiered tariff order would obviously have a tiered response globally with the majority of the countries being at a receiving end. This means the majority of global leaders would take a beating in their respective ratings in their core constituencies.  

Politics of Economics!

While trade pundits get to assess the full impact country wise, let us for a moment get to pivot away from economics to politics. Let us begin with Trump himself. He has played perfectly to his core constituency telling it that he is the ultimate boss man, an avatar he has donned to ‘Make America Great Again’. The messaging from his camp will get louder in the days to come when he is positioned as a leader who defies his friends and foes alike to put America first in his scheme of things. 

Any legitimate outcry on very likely fears of inflation soaring coinciding with recession engulfing America would be sought to be drowned in the cacophony of ‘Make America Great Again’. 

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