That India has for some time been a rising economic power, there can be no doubt. It has now surpassed China as the world’s most populous country and having a large domestic market undoubtedly helps in the creation of large businesses and industry. For the longest time, relations between US and India were cool, mainly because India, starting with its first prime minister Jawaharlal Nehru, pursued a non-aligned foreign policy that chose to not align itself with either of the then two main power blocs of the US and the USSR. As a result, The US tended to see India’s traditional rival Pakistan as more of an ally and favored it.
That changed quite dramatically with the rise to power of Narendra Modi as prime minister, a right wing Hindu chauvinist who assiduously cultivated good relations with the US, especially with Trump. And for a while, the two seemed to be best friends. But recently, there has been a dramatic cooling of relations, with Trump putting some of the harshest tariffs on imports from India.
Isaac Chotiner tries to understand the dramatic shift by talking with Milan Vaishnav, a senior fellow and director of the South Asia program at the Carnegie Endowment for International Peace. As Vaishnav says, the 50% tariff on India is a major blow to India..
I think it’s a significant economic problem because the Indians, in their negotiations, had been given to understand that they would end up with a tariff rate somewhere between fifteen and twenty per cent, which would put them in the ballpark of many of their other Asian competitors. But with fifty per cent, there are just entire industries that are labor intensive whose exports are no longer viable. India has been very late to the game of getting involved in textiles and garments and leather and footwear. These are blue-collar jobs that employ a lot of low-skilled labor; they’ve made an incipient foothold in some of these areas, and that could evaporate. Some economists are projecting that this would shave up to one percentage point off G.D.P. I think actually the number could be much higher because of ripple effects and what it would signal about the investment climate more generally.
There was another serious blow and that was the sudden imposition of a $100,000 fee for issuing H-1B visas. Since more than 70% of such visa holders are Indian, and since India is now the No. 1 recipient of global remittances, this move is also being viewed as aimed at undermining India.
So why has India fallen so quickly and so far from grace in Trump’s eyes? One reason may be that successive US administrations used to see India as a bulwark against increasing Chinese influence in Asia and Africa and thus courted that country. Along with its large market, it could not be totally alienated. With the US turning inward under Trump, however, cultivating India does not seem so important and that nation can be treated with contempt like other countries that have no leverage with the US.
Another reason may be simply pique, because with Trump everything is personal. Trump is openly lusting for the Nobel prize and he wants to claim credit for brokering a ceasefire after the recent flare-up between India and Pakistan. While Pakistan has been fawning over Trump and said that they would nominate hm for the prize because of it, India has refused to credit him with any significant role and Trump is miffed.
As a result of these snubs, Modi is now seeking closer ties with China, another traditional rival with whom it has had border skirmishes for decades. China has been courting many countries, aided by Trump’s tariffs that have hurt them, and the successful results of this was on display at the huge celebration it threw on the occasion of the 80th anniversary of Japan’s surrender at the end of World War II where, in addition to recent celebration showing off its military muscle, many leaders of countries in Asia and Africa, some of them former foes, came together under Chinese auspices to demonstrate the increasing American isolation in world affairs, especially trade. The main countries that skipped the even were the US, the EU and Japan. While Modi did not attend the parade, he did make it a point to attend the Shanghai Cooperation Organization Summit held just before and met with Chinese leader Xi Jinping and spoke warmly about his conversations with Xi and Vladimir Putin.
Modi is clearly walking a tightrope, trying to avoid alienating his ideological allies in the US, western Europe, and Japan, while trying to create better trade with China and Russia.
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