“Liberation Day” Backfire: Did Trump’s Tariff Plan Accidentally Usher in the End of Pax Americana?
As tariffs, a staple of Trump’s second term in office, roll out worldwide, India has found itself the hardest hit. This development is unexpected; the United States and India have a long-standing, relatively diplomatic history, and Trump himself has built strong relationships with those of Indian origin, aligning himself with the ideologies of those like Narendra Modi as well as filling his own administration with Indian-Americans who cater to right-wing ideologies. In fact, until recently, the United States was even India’s largest trading partner. (BBC)
Nevertheless, on Trump’s so-called “Liberation Day”, he stamped India with a 25% tariff rate. For context, most countries were tariffed somewhere in the 10% to 20% range, so India wasn’t a major outlier at this point. A couple of weeks ago, though, these tariffs were bumped to a whopping 50% as Trump retaliated for India buying Russian oil. This 25% penalty, which went into effect Wednesday, August 27th, is allegedly to punish India for funding the war in Ukraine through their purchases. (BBC)
Now it’s up to India’s Prime Minister, Narendra Modi, to figure out how India will cope with this development. American trade experts are telling it how it is; these tariffs are less about American interests and, in short, an embargo on Indian goods. (BBC) Modi shows no interest in stopping the purchase of Russian oil, stating that he must find the ‘best deal’ on oil for the over 1 billion residents he governs over. Earlier this month, he said he would cut back taxes in India, in order to help individuals financially adapt to the dire consequences the tariffs will bring on.
Modi’s reaction is, in many ways, a hard slap of reality to Trump’s face. While Trump’s goal in his embargo-disguised-as-tariff was to pressure Modi into cutting ties with Russia and instead yearn for the economic grace of America, Modi has taken the complete opposite approach.
“We should become self-reliant – not out of desperation, but out of our pride,” said Modi this past month. “Economic selfishness is on the rise globally and we mustn't sit and cry about our difficulties, we must rise above and not allow others to hold us in their clutches.” (BBC)
In addition to re-centering economic self-reliance and further exploring economic ties with Russia in the name of said self-reliance, India has also now looked to rekindle its relationship with China as a work around to the United States’ tariffs. China and India recently pledged to be “partners, not rivals”, with Modi himself saying there was now an "atmosphere of peace and stability” between the two nations. (BBC) This intentional turn away from America and alliance with China and Russia points to a greater pattern; the fading of the final days of Pax Americana while pointing to a potential BRICS alliance as an alternative to traditional models of Western world hegemony.
However, not everyone is thrilled about Modi’s response to the tariff situation. Arvind Kejriwal, the leader of the Aam Aadmi Party and the former Delhi Chief Minister, has accused Modi of “betraying farmers” after the BJP government removed an 11% import duty on American cotton. He’s not too happy with Trump, either; calling him a ‘coward’ for his institution of a 50% tariff.
“PM Modi has taken some decisions behind our backs which are a huge betrayal of the farmers of the entire country,” Kejriwal said at a press conference in Delhi. “Recently, under the pressure of Trump and America, it has been decided that the cotton that comes to India from America, till now, there was an 11 per cent duty on it. In the last few days, the Modi government has decided that the 11 per cent duty has been removed. Now, no duty will be imposed on the cotton coming from America from 19 August to 30 September, for 40 days.” (Times of India)
What does this mean, exactly?
In the simplest terms, American-imposed tariffs on India are making Indian products more expensive in America, which makes Americans less likely to buy them. In turn, there is less demand in India for Indian products to be made and exported, and as a result, Indians lose jobs and India loses money.
Meanwhile, at the same time, removing the 11% import duty on American cotton actually incentivizes Indians to buy American goods, as they now cost less than ever. So, rather than buying Indian goods made from Indian cotton, Indian consumers will turn towards buying American goods made from American cotton. Once again, there is less demand in India for Indian products, and thus this time, Indians lose jobs; this time, its cotton farmers in particular. Modi’s removal of the American cotton import duty may cause a short-term thrill for the average consumer, but the long-term effects for the Indian economy are negative.
Kejriwal has a long history of championing the rights of the working class. His party, the Aam Aadmi Party, is not only the progressive party in India but the fastest growing party in India; Aam Aadmi was the first party to go national only within a few years, following its 2012 founding.
Born out of the India Against Corruption movement, Aam Aadmi focuses on education, public subsidized healthcare, public transport – particularly EV usage and women’s safety on public transport –, and energy, offering free electricity, solar, and water. They’ve long considered themselves a party by the people and for the people. But how will they respond to this recent crisis, one that could thrust them and their influence onto the international stage? Outside of Kejriwal’s press conference statements, only time will tell.
The export industry in India is massive beyond comprehension. Ready-to-wear goods alone are a $16 billion market; producing seasonal styles for multinational companies like Target, Walmart, Zara, and Gap. Of this $16 billion market, thousands, if not millions, are employed; and panic is beginning to ensue on the ground. At some factories, American clients have paused all orders, and factory owners are unsure if there will even be any product to be made once the tariffs have tangible, on-the-ground effect. How many workers will feasibly be able to stay employed? And those who lose their jobs – where will they seek employment elsewhere? These tariffs don’t exactly come during a prosperous time for India’s economy; in fact, the manufacturing sector of GDP has been stagnating at 15%. (BBC)
Regardless of what happens, it’s clear as day that both Modi and Kejriwal have challenges waiting for them ahead. Though nearly oppositionally positioned in their ideologies and tactics when it comes to political problem solving — Modi taking a nation-first approach while Kejriwal a citizen-first one — however both men choose to address the issue of India’s economy will impact their legacies as leaders and the future of their nations. Whether the citizenry is more attracted to Modi’s internationalist perspectives or Kejriwal’s domestic approach will determine the character of India overall, and how it acts in economic, political, social, and cultural arenas.
As for Trump’s tariffs? They’re a symptom of a larger problem – one in which American leadership is grasping at straws to not lose its standing in the world order.