Trump's India Tariff Attack Not The Same As His China Face-Off

"India Is Hitting the US"

“India’s hitting us with 100 per cent tariffs — crazy, right? The whole setup’s been stacked against the US forever,” Trump told a packed Joint Session of Congress on Tuesday (US time). “Come April 2, we’re flipping the script. Whatever they charge us, we’ll charge them right back. And if they pull some sneaky non-cash tricks to lock us out of their market, we’ll throw up our own roadblocks to keep them out of ours.”

This jab comes hot on the heels of Prime Minister Narendra Modi’s US trip a few weeks back, which had Indian businesses buzzing with hope. They figured a trade pact might convince Washington to ease off on the tariff hammer in return for letting more American goods flood into India.

New Delhi even got ahead of the game, trimming duties on goods like bourbon whiskey before the talks even kicked-off. However, Trump’s latest rant suggests those dreams might be wishful thinking.

Goyal’s Dash To Washington

Officials in Delhi’s Raisina Hill had earlier indicated that the mini-trade deal that India was offering — which US officials wanted to model on the US-Japan trade agreement — would take months to finalise. “Now the pressure is on us to tie this up quickly,” said Ministry of External Affairs officials.

Commerce Minister Piyush Goyal made a surprise dash to the US on Monday for urgent trade talks, just as the clock ticks down to President Donald Trump’s looming reciprocal tariffs.

The visit came out of nowhere — Goyal abruptly cancelled his prior commitments for the week, according to insiders. On top of his trade duties, Goyal also wears the hat of Industry Minister, making this trip a critical one to watch.

Officials said India is now looking at cutting import tariffs on multiple product lines, the number of which could vary between a dozen to a score, and include electronics, medical equipment, chemicals and luxury cars.

India may also do away with a levy — the Agriculture Infrastructure Development Cess — imposed on a number of imports, including material building blocks for semiconductors, heavy machinery, solar cells, and luxury cars and motorcycles.

India has already indicated it will try to offset the huge trade balance it has with the US by more oil, defence equipment and by easing norms to help boost foreign investments in its civilian nuclear energy sector. 

Crude oil and LNG imports from America were worth about US$ 6.5 billion in 2023-24, or about 15.5 per cent of its total oil and gas imports in 2023-24 that were valued at over US$ 42 billion.

Defence  deals that have been negotiated or are in the pipeline include the MH-60R Seahawk helicopters (US$ 2.8 billion), Apache helicopters (US$ 796 million) and the Large Aircraft Infrared Countermeasure (US$ 189 million), as also the purchase of 31 MQ-9B Predator drones worth US$ 3.3 billion.

India More Vulnerable

India is vulnerable to US pressure as India has a huge trade balance in favour of it in its trading arrangement with the US and its exports can be substituted by produce made by many competitors.

According to US government data, the goods trade was in favour of India by US$ 45.7 billion in calendar year 2024. In 2023-24, the top merchandise export destinations for India included the USA (17.90 per cent), UAE (8.23 per cent), Netherlands (5.16 per cent) and China (3.85 per cent).

India can be hit by higher tariffs for the sectors it trades in most with the US. The threat of cutting H-1B visas used by Indian software firms to bodyshop techies to America to work onsite is another lever that Trump can use.

India has already slashed its top-end basic tariff rate which stood at 125 per cent to 70 per cent, and its average tariff rate to 11 per cent in the Union Budget, announced at the beginning of February. 

Why China’s Story Is Different

The funny thing is that the US and China slapped yet another round of tit-for-tat tariffs on Tuesday, yet the Hang Seng and the Shanghai Composite Index opened Wednesday higher than the previous close.

Contrast this with the meltdown in India’s stock markets. India’s Sensex fell 7 per cent between January 1, this year, and March 4, while Hang Seng rose by nearly 20 per cent in the same time frame.

Foreign institutional investors led the stampede out of the stock market with sell-offs worth Rs 41,748 crore crore out of Indian markets in February alone, extending their five-month streak.

So far this year, they’ve withdrawn Rs 1,23,652 crore, making them net sellers in 43 of 46 trading days, averaging a daily outflow of Rs 2,688 crore. February was no different, with FPIs unloading stocks in 18 of 20 sessions, following January’s massive ₹81,904 crore exit. It’s clear — the sell-off continues full throttle.

So What Made The Difference?

India’s GDP is growing at a clip faster than China’s. Both have been suffering from consumption constraints, which have slowed down their economic growth. Both have been facing up to US tariff threats. The difference is that China has a lever and India has few if any.

China sells products at a price where there are fewer competitors. Replacing them will not be easy as no other nation has the industrial scale to be able to fill any vacuum that China may create by withdrawing from the marketplace. 

More importantly, China has decided to ring-fence its economy from Trump’s actions by going in for a huge stimulus package which was cleared on Wednesday at its National People’s Congress.

Beijing decided to crank up the financial heat — by releasing 1.3 trillion yuan in ultra-long bonds this year, up from 1 trillion yuan in the previous year. At the same time, it will also allow local governments to issue another 4.4 trillion yuan in special debt.

This 5.7 trillion yuan package is expected to boost domestic consumption and re-focus its market’s attention on the home market and proof the Chinese economy from Trump’s tariff attacks.

“This is what makes the Chinese market so very attractive for the institutional investors… They know that it has internal resilience,” said Amitava Mukherjee, a former World Bank official.

Trump Wants To Cut A Deal

Trump wants to cut a deal with both India and China. He has said that many times. The difference is that he knows that India has few cards up its sleeve and will force a deal. Whereas China has many cards in its hand in this game of tariff poker.

The USA’s total goods trade with China were an estimated US$ 582.4 billion in 2024, of which American  goods exports to China in 2024 were US$ 143.5 billion. It has announced two rounds of tariff hikes on Chinese imports, each time for 120 per cent.

The problem is China is one of the biggest market for American farmers, a politically strong lobby. Beijing has announced it will slap a 10-15 per cent duty on chicken, beef, pork and soyabeans from March 10. The money hit won’t be big, but for Trump, it will be an attack on one his core political constituencies.

Already Trump’s Commerce Secretary Howard Lutnick, Treasury Secretary Scott Bessent and his close aide, tycoon Elon Musk, are believed advising him to strike a deal with Beijing before the “tariff war” gets nastier.