Poker in trade diplomacy
It is difficult to figure out US president Donald J Trump. He is a difficult man to predict at the best of the times. That he is a maverick will be an understatement. He has a certain world view. Rather, he is his own man. And those who must deal with him better see the things through the lens he does.
His mercurial nature is forcing US allies and adversaries alike to reset their relations with the US. And they are having to do it on an ongoing basis. US is still the largest economy and the strongest military power on the planet. Dealing with it has always been challenging given the asymmetry in relation. In Trump America though, it has shot off to absolutely another level, unimagined before. Countries are having to reconfigure their approaches and revise their positions even as they engage hour by hour; minute by minute with President Trump to deal with the unexpected.
Not that this disruption has come unannounced from President Trump. If anything, he never tried to hide it in his political campaigns as he crisscrossed the entire length and breadth of country to canvass for US presidency . From every pulpit available to him during his campaign, Candidate Trump announced that he would come after the deep state, institutions that have perpetuated status quo and implement plans and programs that would make America great again.
Border wall on the southern border (with Mexico), immigration, tariffs, reducing govt expenditure, stopping wars across the world and putting US at the forefront of all trade deals with Europe and beyond were the key words in his stump speeches. President Trump is only following up on the campaign promises held out by the candidate Trump. People may have issues with how he is going about implementing his agenda. It’s understandable for it is grotesque. But they should not have any problem with the issues per se. For he has won an election resounding as he did on those issues only.
His recent acrimonious meeting with President Zelenskyy in Oval office in full glare of media is the clearer reflection yet of him as a leader. There is no love lost between him and president Zelenskyy. But few expected that he would throw all diplomatic niceties and decorum to the winds while dealing with his counterpart from Ukraine. He always drives a hard bargain in his talks with the world leaders given his background as a businessman. But he was not sitting in the boardroom of Trump Tower in NY discussing some real estate deal? Some one needed to tell him-he was the US president.
President Trump is not a great backer of NATO-transatlantic treaty grouping for defence of Europe and NA. He has long held the view that Europeans are freeloaders and that NATO has been chiefly financially backstopped by the US. He has famously said that US is protected by an ocean ( Atlantic) and does not need NATO for its security. In his recent meeting with NATO Secy General, Mark Rutte, President Trump told him that US control of Greenland is necessary for international security, escalating his campaign to annex the arctic Island. Rutte told Trump that he would leave the question of Greenland’s future to others ( countries in the high north), adding that he would not drag NATO into the debate on Greenland.
Rutte and Trump discussions are revealing; for they lay bare the latter’s priorities. In the first term, President Trump was seen driven by mercantilist approach. In his second term, he has also nailed his colours to the mast of imperialism. What else explains his noises on making Canada 51st state of US and changing the name of Gulf of Mexico to Gulf of America. While Trump, the imperialist, may have raised hackles, Trump, the businessman, is doubling down on tariffs to browbeat the countries to lower the tariffs on American goods. Tariffs have spooked the US markets as well as other world markets amidst fears of recession in US and other countries. Notwithstanding the potential recessionary effects of tariffs, the tariff policy is not likely to be walked back any sooner by US for Trump sees tariff as ‘the beautiful word’ in the dictionary.
Trump’s reciprocal tariffs are set to come into effect from April 2 this year. According to a report, these reciprocal tariffs will hit 87 % of India’s total exports to the US worth 66 billion US dollars. An internal assessment has it that India may reduce tariff on goods imported from US worth 23 billion US dollars. But it will largely depend upon the shape that the bilateral trade agreement ( BTA ) between the two countries takes as and when it happens. India has already lowered tariffs on couple of US imports-bourbon whiskey and Harley Davidson motorcycles. Trade delegation level talks between the two countries to work out BTA which ended on 29 March have not reportedly delivered the outcome that India hoped it might. Both sides have strong positions on tariffs and more talks will be needed to work through the difficult issues to a mutually acceptable solution.
India is expecting a waiver from US on April 2 tariffs in support of the trade pact that some feel may happen by the end of this year. Few though believe that waiver may come through as the President Trump may like to keep up the pressure to force concessions from India. Other countries including China have either hit back with tariffs of their own on US imports or may do so in future. Trade war has already begun and is going to get worse in the coming days. Trump is unpredictable, therefore, it would serve us well to play poker with him on tariffs and not put all the cards on the table. Playing a long game with him in which you hide as much as you reveal would surely ruffle him. When it is US versus the entire world, it is one thing. When it is US versus India, it is entirely another. He has taken on the entire world; let’s see how others respond before we show our hand.
The writer is an IFC Milken Scholar
