DC Edit | Tariffs loom as India-US ties soar after Modi visit

The optics were great. They always are when Indian Prime Minister Narendra Modi and US President Donald Trump meet. Their hug spelt the regular warmth, and the firm handshake reflected the strength of India-US ties that are certain to grow manifold with a transactional Republican President in the White House than a preachy Democrat.

The Indian foreign office may have worked overtime to produce a punchline with alliteration in MAGA plus MIGA equals Mega prosperity. But the feeling remains that the Washington meeting may do more for MAGA than MIGA as India commits in a big way towards the USA for defence purchases, including stealth F35 aircraft being offered as an alternative to the Russian Sukhoi Su-57 and energy deals that will be aimed to making America India’s biggest supplier.

The benefits are clear as the security aspect gathers strength with Mr Trump calling for damping down of border tensions with China even as he makes more than a symbolic gesture in urgently allowing the extradition of 26/11 plotter Tahawwur Rana over which US governments dragged their feet for years. For a nation struck by 26/11 terror akin to the US’s 9/11, a plotter to face justice on its soil holds a high emotional quotient.

Dark clouds may, however, have gathered already with the US announcement of reciprocal tariffs that nearly coincided with the Modi visit. This is Mr Trump’s ‘fair trade’ move through which India, along with Japan and other countries considered equally friendly with the US, are likely to be hit. If the US also targets GST rates on American goods as it has on VAT that the UK levies, India will take an even deeper hit.

Having spared no one, friend or foe in the matter of tariffs, Mr Trump was unlikely to allow India any leeway despite its preparation for Mr Modi’s visit by dropping retaliatory tariffs on American almonds, apples, chickpeas, lentils and walnuts and the Harley Davidsons, of course. Discussions on a comprehensive free trade deal would, however, help in addressing the many tariff issues.

Agreeing to ramp up trade and defence purchases is fine, but it appears these will do more for America as a supplier of military hardware and high-tech chips for AI development than India, which presently enjoys a $45 billion trade surplus with the US. To avoid reciprocal tariffs, Indian exporters may also have to look at assembling manufactured goods in the US as Mr Trump’s favourite motorcycles may take that route in these complicated tariffs and trade exchanges.

All the positives flowed around ties on the security front as the US and India plan to sign a new 10-year defence partnership even as Mr Trump called out Pakistan, warning it not to indulge in extra-territorial terror. And, intriguingly, the US President has disclosed that the US has no interest whatsoever in Bangladesh where the Democrats may have allowed the foisting of a caretaker regime amid the chaos of student protests and riots.

The geopolitically important messages regarding Pakistan and Bangladesh must have come as music to Prime Minister’s Modi’s nationalistic thrust and his newly coined ‘Make India Great Again’ slogan that resonates with Mr Trump’s own brand of US nationalism. Going forward, US-India cooperation in civil nuclear power generation, based on the historic civil nuclear deal, might be a significant development towards India building on its clean power resources.

Like world traders, Indians may also be anxious ahead of having to navigate Mr Trump’s reciprocal tariff regime, but India can prepare for it with a greater sense of security regarding its military preparedness as it lives in a zone thick with prickly neighbours. The stealth jets will be a great addition when they fly in IAF insignia.