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Wednesday, February 12, 2025

Bharat’s Tariff Cuts: Smart Diplomacy or Costly Concession?

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Paromita Das

GG News Bureau
New Delhi, 12th Feb.
As Bharat prepares to lower tariffs ahead of a high-stakes meeting between Prime Minister Narendra Modi and then-US President Donald Trump, the move highlights the complexities of international trade negotiations. While such tariff reductions may seem like a goodwill gesture to ease tensions and foster economic cooperation, they also raise important questions about long-term strategic implications.

The global trade landscape has been marked by increasing protectionism, with the US pushing for greater reciprocity in trade deals. Bharat’s decision to cut tariffs on electronics, medical and surgical equipment, and chemicals is an attempt to navigate these pressures while safeguarding its broader economic interests. However, history has shown that concessions in trade negotiations can be a double-edged sword—offering short-term diplomatic relief but potentially harming domestic industries in the long run.

This policy shift demands a closer examination: Is Bharat making a calculated move to maintain trade stability, or is it risking economic vulnerabilities by yielding too much too soon?

The Tactical Play: Bharat’s Trade Concessions

Bharat’s tariff reductions come at a time when the US has been aggressively pushing for reciprocal trade measures. The Trump administration’s stance on tariffs, particularly its proposed 25% duty on steel and aluminium imports, has sent ripples through global markets. For Bharat, a major exporter of engineering goods that rely on these metals, such a tariff hike could be damaging. By preemptively lowering tariffs on select American imports, Bharat appears to be adopting a strategy of de-escalation, aiming to keep trade relations smooth while negotiating for exemptions or reduced barriers for its own exports.

This approach, while pragmatic, also comes with risks. Concessions on imports, particularly in sectors where Bharat has strong domestic manufacturers, could weaken local industries. The Bharatiya government has long championed self-sufficiency in manufacturing, and these tariff reductions could create challenges for businesses that rely on protective policies to compete with foreign players. The question remains: will these short-term diplomatic moves pay off, or will they create long-term dependencies that hinder Bharat’s economic ambitions?

Impact on Steel, Aluminium, and Engineering Goods

One of the biggest concerns surrounding this tariff adjustment is its potential impact on Bharat’s steel and aluminium industries. These sectors are critical not only for exports but also for domestic infrastructure and industrial development. If the US proceeds with a 25% tariff on Bharatiya steel and aluminium, it could severely dent the competitiveness of Bharatiya engineering goods in the American market.

Bharat’s diplomatic efforts may help in negotiating exemptions, but there is no certainty that such measures will be granted. If the US chooses to apply stringent tariffs regardless of Bharat’s gestures, the decision to lower import duties on American goods could appear one-sided rather than mutually beneficial. While Bharat may be hoping for a reciprocal reduction in trade barriers, there is always a risk that the US will accept the concessions without offering meaningful relief in return.

Beyond Trade: The Larger Geopolitical Picture

Trade discussions between Bharat and the US rarely occur in isolation. The broader geopolitical landscape, particularly the US’s positioning of Bharat as a strategic counterbalance to China, plays a significant role in shaping economic negotiations. While the US has been vocal about strengthening ties with Bharat, recent actions—such as the deportation of Bharatiya nationals—indicate that the relationship is not without friction.

Beyond tariffs, the Modi-Trump meeting is expected to address defence cooperation, technology partnerships, and supply chain resilience. These discussions could yield important agreements that go beyond trade, reinforcing Bharat’s role in the Indo-Pacific strategy. However, trade remains a sensitive issue, and Bharat must ensure that economic cooperation does not come at the cost of its industrial growth and strategic autonomy.

The Risk of One-Sided Agreements

A potential “mini trade deal” has been hinted at in diplomatic circles, but its details remain uncertain. If structured properly, such an agreement could provide immediate relief to specific sectors while maintaining Bharat’s broader economic interests. However, past experiences with trade negotiations suggest that rushed deals often lead to imbalances that are difficult to correct later.

Bharat must be cautious not to agree to terms that disproportionately benefit the US while limiting its own economic leverage. While it is important to maintain strong trade relations, it is equally crucial to ensure that domestic industries are not weakened in the process. A well-balanced trade deal should facilitate growth on both sides rather than creating economic dependencies.

Conclusion: A Delicate Balancing Act

Bharat’s decision to cut tariffs ahead of the Modi-Trump meeting is a strategic move aimed at preventing trade tensions from escalating. While it demonstrates Bharat’s willingness to engage in fair trade practices, it also exposes the risks of over-accommodation. The effectiveness of this strategy will depend on how well Bharat negotiates reciprocal benefits, ensuring that its domestic industries are not undermined in the process.

The outcome of this meeting will set the tone for Bharat-US trade relations in the years to come. If Bharat can secure meaningful concessions while protecting its own economic interests, the move will be seen as a masterstroke in diplomacy. However, if the tariff reductions lead to long-term disadvantages without tangible gains, they may be viewed as a miscalculated compromise.

Ultimately, the challenge lies in striking a balance—offering enough to maintain strong trade ties with the US while safeguarding Bharat’s long-term industrial and economic stability.

 

The post Bharat’s Tariff Cuts: Smart Diplomacy or Costly Concession? appeared first on Global Governance News- Asia's First Bilingual News portal for Global News and Updates.



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