We can't be sure 25% will be Trump's final tariff; India should have taken tougher stand like China: Swaminathan Aiyar
We just spoke last evening. We were thinking about what is going to happen, but finally Donald Trump has decided on a 25% tariff plus additional penalties. Your first thoughts.
Swaminathan Aiyar: I would straight away say please do not say finally. Mr Trump is still going to be dancing around. He says 25% plus. It may then become minus. It may become a plus again. Anybody who thinks that this is a final tariff for his four years of power is very much mistaken. I am quite sure that in subsequent years too he is going to try.
First this shows that all the stuff about India being a special position or some chemistry between Modi and Trump was optimistic faff. And if the interim tariff was supposed to be 26% and people thought oh, how high and now it is 25 plus, it is going to be even worse than the interim tariff. There were a lot of optimistic things about some interim agreement and that is not the way it is working out. I would also add that there were many people who earlier said let us be very accommodative, let us give in to Trump as far as possible and let us not get into a retaliation game with him. For instance, one thing that we gave up without anything in return was the Google tax to try and modify the man in advance. Now, if we see between our approach and China's approach, China said I am absolutely going to stand up to you. The Chinese approach ultimately turns out to be better. If you stand up to Trump, you are going to get a better deal. If you just give in to begin with, he sees a weakness. He sees that India just does not have that many cards in this particular game and he is going to slap you with whatever he wants. You just say that I am going to buy some more US energy. Well, everybody is saying that. The EU is saying that. Even China is saying that and that does not appear to be any kind of strong point that we have. So, all I can say is that we should have been tougher to begin with, but let us see what happens. This is a significant tariff. With this tariff you are going to be harder hit. Earlier, we thought that we will be better off than say Bangladesh or various other people and have an advantage over them. Now, it is no longer so certain. We just do not know. So, let us see going forward. I will merely say things have turned out to be worse than we had expected. It shows that there is no special chemistry and it shows that we should have stood up to China in the first instance instead of being so soft.
We will have to see how the situation pans out. But what is your understanding on how long are these tariffs going to continue because we were given to understand that a trade team from the United States is going to visit India on August 25th. Do you think there is going to be some respite and how soon can a respite from these tariffs come about?
Swaminathan Aiyar: Anybody who thinks that because Trump comes here it means that we get some favours on the Trump side on the tariff side, is wrong. I think we have already been shown very clearly what the situation is. He has treated us like any other country and the fact that we were soft to begin with, has not wooed him over. There is no special chemistry. It was just a mistake to start on that basis. So, again, the idea that just because he drops into India he will give us a favour or two, has no basis. He may give us a slap or two. Given the kind of reputation he has, the way he is carrying on, we have to get rid of the idea that by being friends, by being goody-goody we are somehow going to get something out of him on the trade side. The plain and simple fact is that they have a large trade deficit. It is not going to go away. But I have to disagree with you just a little bit. You can disagree with me as well. When it comes to India's strategy to deal with the United States, we have stood our ground, we have not let the United States cross the very red lines that India is trying to protect whether it is with respect to agri, dairy, GM crops, or even on e-commerce. So, India has stood its ground and perhaps it is one of very few countries in Southeast Asia which has not really agreed to Donald Trump's tariffs and conditions and of course, the pressure that he is trying to build since April.
Swaminathan Aiyar: I would say that you are going to be hit by him anyway. He is not interested in India doing well. He is interested in the USA doing well. There is this large trade deficit between the two and truth be told, it is difficult to see what India could buy. Earlier, there was this talk about buying fancy fighter planes at $100 million each. After what we have seen in Operation Sindoor and in Ukraine, the success of drones and loitering munitions, we should just forget about massive arms purchases since it is a waste of money. We should be developing much cheaper things, a lot of it on our own. So, as I said, just by saying that we will buy more arms, we should not buy more arms. We are offering to buy more energy but everybody is offering to buy more energy from them and there is a limit to what they can produce.
How do you anticipate the markets to react today? We have spoken to some other investors as well. They are saying that the markets have already priced in the impact of these tariffs. What is your expectation on how the markets are going to react tomorrow?
Swaminathan Aiyar: In the short run, there can be a setback. I believe the rupee has weakened which again will be a weak point as far as foreign investors are concerned. The outcome right now is much worse than had been anticipated because the outcome is much worse, there will be some downward movement. By and large, the markets were very disturbed in April when Mr Trump first came out with these huge so-called reciprocal tariffs. After that they say this guy put something high and he negotiates something else, up and down, this that and the other. So, they are saying that this will have some impact in the short run but seeing through it to the longer run, they are saying India has good prospects and the world has good prospects. Yes, the growth prospect has been brought down earlier in April, but you have just seen that the IMF in its World Economic Outlook has said things do not look as bad as they looked like in April and because of that, there have been some upward revisions. As I said, in the short-term, there are some negatives but in the medium term, the market will go up again.
So, when you say that in April things did not look as bad perhaps and it is going to perhaps get impacted that much more because these tariffs will come into effect starting August 1. There was a relief period given by Trump and of course, 10% baseline tariff applied on countries across the globe and of course, the impact is going to be that much more. You mentioned the IMF data and the RBI also projected that the Indian economy will grow between 6% and 6.5%. Can that number be sustained and what impact will these tariffs have on the Indian economy in the near term?
Swaminathan Aiyar: Apart from what I have said, we are going to find it more difficult to export. The idea that India would have a window to compete better vis-à-vis China is now an illusion. Earlier, there was the idea that the smartphones being manufactured by Apple in India, are going to be competitive with China. I am no longer quite certain that would be the case. The value addition in India is so small that if there is a 25% tariff, how much advantage will we have over anybody else? The same question might apply to Samsung. We were very gung-ho on this particular sector and a very large part of these exports were going to the USA. There is now a big question mark. Look at the entire PLI policy. There were 14 sectors, and out of those 14 sectors, only one sector seems to be succeeding, even that is in jeopardy.
But still the cost of making an iPhone in the United States is far more than it is of making it here and, of course, data suggests that iPhone exports from India to the United States have exceeded those from China. But rightly said, it remains to be seen whether that momentum can be sustained. On the 25th, a team from the United States is going to arrive in India. How soon can a bilateral trade agreement, the first branch of it, can be completed? Do you think India and the United States will be able to finalise a deal by fall this year?
Swaminathan Aiyar: In my personal opinion, Trump regards this as an occasion to bully India and force it into various contracts especially on the arms. Anybody who thinks he is coming here to give you some golgapas and lollipops is wrong. I do not think that is the way he behaves. He will come here and say we are great friends. So, you must buy all these extremely expensive aircraft from me and the electronics that you require for this. He will offer you some very expensive drones also and maybe some of those we can buy. But Mr Trump will regard this as an occasion to squeeze more out of India.
Do not think that the relationship is such that we can squeeze much out of him. There is this constant notion that if anything comes here it is a gain. Let us wait and watch. I am willing to bet that Mr Trump will push his agenda.
If we see the trend that Donald Trump has been following with several countries in negotiations, be it with countries in Southeast Asia or with EU or Japan, a significant component is related to investments into the United States or perhaps as a part of manufacturing. Specifically in talks with the EU, they have committed to investments in energy infrastructure in the United States. If India asks for relief on these tariffs and of course on steel and aluminium, is there going to be a component about perhaps increasing investments into the United States?
Swaminathan Aiyar: The Government of India has no ability to force Indians to invest in energy there. So, it is not going to happen. China may be able to give an assurance like that. We cannot say we give you an assurance that Reliance is going to invest out there. If you say ONGC is going to invest, I mean people will find it hard to find anything even here, let alone in various other places. It will not be treated as serious. As I said, India is not a big important country. We are still a lower middle-income country. So, in terms of competing with the European Union, Britain, Japan – all of whom have been asked to invest, we will remain a tiny pygmy compared with the others. So yes, he will demand that. And yet his main expectation is that India will buy stuff from America. As for foreign investment in another country, it takes many years to work that out. The investment itself will be distributed over a large number of years, especially in the energy sector. I do not think this is where India has any kind of comparative advantage. We do have a comparative advantage in buying arms, but as I said, I am against buying arms. At this point of time, we need to totally change the kind of armaments pattern that we have had so far and that will not be something that Mr Trump will be happy about.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Hindustan Times
33 minutes ago
- Hindustan Times
Second US appeals court open to blocking Trump's birthright citizenship order
By Nate Raymond Second US appeals court open to blocking Trump's birthright citizenship order -U.S. President Donald Trump's order restricting birthright citizenship appeared on Friday to be headed toward being declared unconstitutional by a second federal appeals court, as judges expressed deep skepticism about a key piece of his hardline immigration agenda. A three-judge panel of the Boston-based 1st U.S. Circuit Court of Appeals sharply questioned a lawyer with the U.S. Department of Justice as to why they should overturn two lower-court judges who blocked the order from taking effect. Those lower-court judges include one in Boston who last week reaffirmed his prior decision to block the order's enforcement nationally, even after the U.S. Supreme Court in June curbed the power of judges to broadly enjoin that and other policies. The San Francisco-based 9th U.S. Circuit Court of Appeals last week became the first federal appeals court to hold Trump's order is unconstitutional. Its ultimate fate will likely be determined by the U.S. Supreme Court. Justice Department attorney Eric McArthur said on Friday that the citizenship clause of the U.S. Constitution's 14th Amendment, which was ratified in 1868 after the U.S. Civil War, rightly extended citizenship to the children of newly-freed enslaved Black people. "It did not extend birthright citizenship as a matter of constitutional right to the children of aliens who are present in the country temporarily or unlawfully," he said. But the judges questioned how that argument was consistent with the Supreme Court's 1898 ruling interpreting the clause in United States v. Wong Kim Ark, long understood as guaranteeing American citizenship to children born in the U.S. to non-citizen parents. "We have an opinion by the Supreme Court that we aren't free to disregard," said Chief U.S. Circuit Judge David Barron, who like his two colleagues was appointed by a Democratic president. Trump's executive order, issued on his first day back in office on January 20, directs agencies to refuse to recognize the citizenship of U.S.-born children who do not have at least one parent who is an American citizen or lawful permanent resident, also known as a "green card" holder. Every court to consider the order's merits has declared it unconstitutional, including the three judges who halted the order's enforcement nationally. Those judges included U.S. District Judge Leo Sorokin in Boston, who ruled in favor of 18 Democratic-led states and the District of Columbia, who had swiftly challenged Trump's policy in court. "The Supreme Court has repeatedly recognized children born to individuals who are here unlawfully or who are here on a temporary basis are nonetheless birthright citizens," Shankar Duraiswamy, a lawyer for New Jersey, argued on Friday. The 6-3 conservative majority U.S. Supreme Court on June 27 sided with the administration in the litigation by restricting the ability of judges to issue so-called universal injunctions and directing lower courts that had blocked Trump's policy nationally to reconsider the scope of their orders. But the ruling contained exceptions, allowing federal judges in Massachusetts and New Hampshire and the 9th Circuit to issue new decisions stopping Trump's order from taking effect nationally. The rulings on appeal to the 1st Circuit were issued by Sorokin and the New Hampshire judge, who originally issued a narrow injunction but more recently issued a new decision in a recently-filed class action blocking Trump's order nationwide. This article was generated from an automated news agency feed without modifications to text.
Mint
33 minutes ago
- Mint
Second US appeals court open to blocking Trumps birthright citizenship order
Boston-based federal appeals court skeptical of Trump's order One appeals court has already ruled order is unconstitutional U.S. President Donald Trump's order restricting birthright citizenship appeared on Friday to be headed toward being declared unconstitutional by a second federal appeals court, as judges expressed deep skepticism about a key piece of his hardline immigration agenda. A three-judge panel of the Boston-based 1st U.S. Circuit Court of Appeals sharply questioned a lawyer with the U.S. Department of Justice as to why they should overturn two lower-court judges who blocked the order from taking effect. Those lower-court judges include one in Boston who last week reaffirmed his prior decision to block the order's enforcement nationally, even after the U.S. Supreme Court in June curbed the power of judges to broadly enjoin that and other policies. The San Francisco-based 9th U.S. Circuit Court of Appeals the first federal appeals court to hold Trump's order is unconstitutional. Its ultimate fate will likely be determined by the U.S. Supreme Court. Justice Department attorney Eric McArthur said on Friday that the citizenship clause of the U.S. Constitution's 14th Amendment, which was ratified in 1868 after the U.S. Civil War, rightly extended citizenship to the children of newly-freed enslaved Black people. "It did not extend birthright citizenship as a matter of constitutional right to the children of aliens who are present in the country temporarily or unlawfully," he said. But the judges questioned how that argument was consistent with the Supreme Court's 1898 ruling interpreting the clause in United States v. Wong Kim Ark, long understood as guaranteeing American citizenship to children born in the U.S. to non-citizen parents. "We have an opinion by the Supreme Court that we aren't free to disregard," said Chief U.S. Circuit Judge David Barron, who like his two colleagues was appointed by a Democratic president. Trump's executive order, issued on his first day back in office on January 20, directs agencies to refuse to recognize the citizenship of U.S.-born children who do not have at least one parent who is an American citizen or lawful permanent resident, also known as a "green card" holder. Every court to consider the order's merits has declared it unconstitutional, including the three judges who halted the order's enforcement nationally. Those judges included U.S. District Judge Leo Sorokin in Boston, who ruled in favor of 18 Democratic-led states and the District of Columbia, who had swiftly challenged Trump's policy in court. "The Supreme Court has repeatedly recognized children born to individuals who are here unlawfully or who are here on a temporary basis are nonetheless birthright citizens," Shankar Duraiswamy, a lawyer for New Jersey, argued on Friday. The 6-3 conservative majority U.S. Supreme Court on June 27 sided with the administration in the litigation by restricting the ability of judges to issue so-called universal injunctions and directing lower courts that had blocked Trump's policy nationally to reconsider the scope of their orders. But the ruling contained exceptions, allowing federal judges in Massachusetts and New Hampshire and the 9th Circuit to issue new decisions stopping Trump's order from taking effect nationally. The rulings on appeal to the 1st Circuit were issued by Sorokin and the New Hampshire judge, who originally issued a narrow injunction but more recently issued a new decision in a recently-filed class action blocking Trump's order nationwide. This article was generated from an automated news agency feed without modifications to text.
Mint
33 minutes ago
- Mint
Soy futures post weekly loss on expectations for big US crop
CHICAGO, - Chicago Board of Trade soybean futures finished flat on Friday but notched a second consecutive weekly decline as ample global supplies, favorable U.S. weather and weak Chinese demand hung over the market. U.S. farmers were expected to harvest bumper soybean and corn crops this autumn following non-threatening weather conditions. At the same time, they worried that President Donald Trump's latest wave of tariffs may hurt American farm exports at a time when soy and wheat sales have struggled. The United States faces stiff competition for global soy sales from Brazil, the world's biggest exporter of the oilseed. "Expectations of a robust U.S. harvest, alongside a second consecutive record Brazilian crop, are expected to weigh on prices for the remainder of the year," analysts at BMI, a unit of Fitch Solutions, said in a note. CBOT November soybeans ended unchanged at $9.89-1/4 a bushel after falling earlier to the lowest level since April 9. The contract lost about 3.1% for the week. China, the world's biggest soy buyer, faces an August 12 deadline to reach a durable tariff agreement with Trump's administration. The United States believes it has the makings of a trade deal, but it is "not 100% done," Treasury Secretary Scott Bessent said on Thursday. A Chinese buyer signed a deal this week to import 30,000 metric tons of Argentine soymeal, as feed producers move to lock in cheaper supplies from South America, two trade sources said. In CBOT wheat, September futures ended down 6-1/2 cents at $5.16-3/4 per bushel. The contract set a low of $5.16-1/4 a bushel earlier in the session and tumbled 4% for the week as in the Northern Hemisphere brought in new supplies. CBOT corn also slumped, with the December contract closing 3 cents lower at $4.10-3/4 a bushel. It lost about 2% for the week. Export sales of corn have been brisk as buyers take advantage of low prices. The U.S. Department of Agriculture reported exporters sold a total of 352,160 metric tons of U.S. corn to unknown destinations via its daily reporting system. This article was generated from an automated news agency feed without modifications to text.
