WITH the US’ Damocles sword of reciprocal tariffs hanging over its head, the Modi government is surrendering instead of resisting. The US President Donald Trump explicitly stated that India would be on the list of countries subject to reciprocal tariffs from April 2, irrespective of its good relationship with the US. The Modi government, instead of meeting this challenge, is ready to reduce tariffs on nearly 55 per cent of US goods and in the process sacrifice Indian interests.

The government is so afraid of antagonising Trump that in the Union Budget itself, it announced the reduction of tariffs on certain US products such as Bourbon whiskey, ethernet switches and Harley-Davidson motorcycles. On March 25, the finance minister moved an amendment to the Finance Bill in Parliament seeking permission to abolish the 6 per cent digital tax, primarily benefitting US software companies like Google. The minister also defended the tariff reductions on various goods as “rationalisation”. She however chose to remain silent on how domestic producers would be impacted by such a reduction in tariffs.

It is important to note that some of the top US exports to India are levied very low tariffs. For instance, US petroleum crude was charged only Re 1 per tonne, making it one of the lowest-taxed imports despite its high value. Similarly, other key US exports, such as coal, Liquefied Natural Gas (LNG) and aircraft, are taxed at just 2.5 per cent. What the US wants is a reduction in tariffs on agricultural products, dairy products and certain key manufactured goods, and open up these sectors for the exploitation of US capital.

The main purpose of the US trade delegation’s current four-day visit to India is to ensure a ‘balanced’ trade between the two countries. Trump has made it clear what the US means by  balanced trade – a reduction in tariffs on US goods to grant them unfettered access to Indian markets.

The meek attitude of Modi-led BJP government is emboldening the US to demand more and more concessions from India. The US Commerce Secretary recently stated: “I said to PM Modi, you have 1.4 billion people and you brag to us how amazing your economy is…Why won’t you buy a bushel of our corn? So (US) farmers can’t go to (India) but (Indian farmers) can come at us…Why is that okay?” In the face of such abrasive language, Prime Minister Modi’s tall talk of muscular foreign policy is proving to be all style and no substance.

According to a report by the Indian Council for Research on International Economic Relations (ICRIER), the tariff gap between the US and India is particularly high in the agriculture sector. This exists largely to protect Indian agriculture from the heavily subsidised agriculture of the developed countries like the US, Australia and the EU. The US wants the Indian government to open up its agricultural sector by lowering tariffs and allowing the entry of foreign agri-corporates. Reports indicate that the government is acquiescing to the US demands for opening up of our agricultural sector for US exploitation.

The Indian government is ready to open our market to US corn, soyabean, cotton, rice, pulses and even dairy products. This would strangulate Indian agriculture as our farmers would not be able to compete with heavily subsidised US imports. Reducing tariffs on US goods would also adversely impact India’s pharmaceuticals and automobile industries.

The government has held many rounds of discussions with Indian industrial houses to identify products on which tariffs can be reduced. It was made clear that the government intends to resolve most trade issues during the visit of the US delegation. Industry representatives were also asked to suggest US goods that could be imported, even if they are costlier. The government feels that by increasing our imports of costly US goods, the present trade deficit with the US can be reduced. While this approach may appease the US, it would deny Indian consumers access to cheaper and better alternatives available in the market.

To ensure that no cheaper alternative remain and all the countries are forced to depend on US exports, a belligerent Donald Trump announced on March 24 that countries importing oil from Venezuela would be levied an additional 25 per cent tariffs. During Trump’s first term, the previous BJP-led central government caved to US pressure and halted oil imports from Venezuela. It resumed purchasing oil from Venezuela from December 2023 due to its lower cost. Now, fearing Trump’s renewed threats, the government has already agreed to buy more petroleum crude from the US. While the US continues to act as a bully, the BJP government is meekly surrendering. 

In contrast to the BJP government’s submissive attitude, we find even close US allies like Canada standing up to the US. Canada retaliated with its own tariffs over US products, when the US increased tariffs on steel and aluminum. Mexico, the EU and China are all countering US threats and are preparing their economies to meet the challenges posed by reciprocal tariffs. On the other hand, the BJP government is not even ready to question the US, let alone challenging it.

We should not allow the US to run roughshod over the Indian economy and the livelihood of our farmers, workers and middle-classes. Public opinion must be mobilised to prevent the government from surrendering to the US. The interests of the Indian people are paramount and must be protected at all costs.

(March 26, 2025)