How India can play hardball with Trump and win
Donald Trump
rushes to stitch together trade deals ahead of a key July 9 deadline, India finds itself in a rare position of strength. While smaller economies like Vietnam have yielded to US demands including drastically lowering tariffs and opening markets India has more room to bargain. According to Swaminathan Aiyar, Consulting Editor at ET Now, India should recognise its leverage and use it wisely.
'I really think we should be tough and hold out,' Aiyar told ET Now in an interview. 'Our strength is that because we are short of oil and gas, we can be among the very few countries that are going to shrink their trade deficit with the USA.'
As per reports, oil imports from the US rose to 439,000 bpd in June, a massive jump from 280,000 bpd purchased in the previous month.
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India's Trump card: Energy imports
Trump has long railed against America's trade deficits, casting them as proof of unfair treatment by foreign governments. But unlike Vietnam, India has a unique bargaining chip: energy.
India's rising demand for oil and gas gives it the ability to import more from the US, providing a tangible way to shrink the bilateral trade gap. That's exactly the kind of deal Trump wants to parade and the reason, Aiyar says, India doesn't need to roll over.
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''So, I would say, India can massively increase its imports of oil and gas and therefore be in a better negotiating position," Aiyar noted. "Other countries will find it very difficult because I do not think they are in a position to massively increase imports of energy."
Contrast with Japan and the EU
While Vietnam was quick to grant the US zero-duty access, largely symbolic given the limited volume of U.S. exports to Vietnam, Japan and the EU have refused to budge. Both economic powerhouses have rejected what they see as unfair and one-sided American demands, even at the risk of delaying trade agreements.
This show of resistance, Aiyar believes, sends a broader message: countries need not cave under pressure, even when the US is playing hardball.
"What is clear at this point is that neither Japan nor the European Union says that they are so afraid of the US and are going to give in. They are saying that they are going to continue and have very serious problems with US proposals, we are not going to keel under," he said.
"So, those two biggest trading partners are not going to cave under. And if they continue, then in some sense it is a sign to India and others not to cave in."
Vietnam deal- Not an economic win
Trump's announcement that Vietnam will pay 20% tariffs and give 'total access' to the US market may sound dramatic, but Aiyar dismisses it as largely theatrical.
"The plain and simple fact is that they(Vietnam) import very little from the USA. And if that comes in on zero duty, I mean they are perfectly happy to import a little more from the USA. Trump's problem is that the USA is uncompetitive on most items," he noted.
"So, if they say that import duty on cars comes down to zero, how many American companies are going to be competitive compared with the Japanese, the Koreans, and even with the Europeans. Vietnam was willing even earlier to say okay we are willing to do a zero tariff."
In contrast, India represents a major potential buyer of US energy, defense equipment, and select high-tech goods — the kind of trade that Trump could sell as a real win.
Agri red lines still hold
Still, the US wants more, particularly access to India's agricultural and dairy markets. But that's a non-starter, Aiyar says. With political sensitivities running high after the farmer protests and strong opposition to genetically modified (GM) crops, any serious concessions on agriculture could trigger major backlash.
Trump's farm supporters want agri wins. But India won't allow GM maize or wheat.
Aiyar pointed out, "there is also the problem that America has genetically modified crops in the case of soybean and in the case of maize and in the case of wheat. If we allow this in, then we will not be allowed to export to Europe because Europe won't take genetically modified crops."
The clock is ticking, for Trump
With Trump setting himself a tight window to announce deals, the pressure is squarely on Washington not New Delhi. Aiyar believes Trump's strategy is as much about optics as outcomes.
"Even where there are partial agreements, as may be the case with India, he will play that up."
"He's a performer. A stage actor,' Aiyar said.
India may not be able to match Vietnam's speed, but with energy imports as a powerful bargaining chip, and will to resist pressure on agriculture, India has the space to negotiate a deal that works for its interests.
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