While averting a trade war, the deal sidelines India’s opportunities and delays key agreements.
An interim trade deal between the United States and China will defer a trade war between the two economic superpowers and avert an impending global slowdown. However, it will upset the plans of countries like India, which had sought to capitalise on the rift emerging between the world’s biggest consumer and the world’s largest producer.
Under the interim deal, which will be in force for 90 days, the US has reduced its punitive tariff of 145 per cent to a mere 30 per cent, just 20 percentage points higher than the tariff applicable to India. Similarly, China has agreed to lower its reciprocal 115 per cent tariff on US goods to 10 per cent.
The deal, however, fails to address US President Donald Trump’s concerns about the ballooning trade deficit and Americans losing their jobs to China. Washington has a trade deficit of $295 billion with China. There is nothing that the US produces at competitive prices that China does not also produce. Unless China promises to invest in bridging the trade deficit by setting up American manufacturing facilities, the gap between imports and exports cannot be closed.
The new bonhomie casts a shadow over the plans of Indian entrepreneurs to attract American investment, and the delay in the proposed trade deal between India and the US is also detrimental to Indian businesses. India’s decision to notify the World Trade Organisation (WTO) of its intent to withdraw concessions offered to American products does not inspire confidence in the relationship that America seeks to develop with India.
Notwithstanding China’s offer that convinced the US to lower tariffs, Beijing remains the only true adversary to the US, both economically and ideologically. Unless the US is dislodged from its pre-eminence, China cannot become the mythical Middle Kingdom of the world.
Therefore, a friendly and strong India is indispensable for the US if it wishes to retain its global leadership.
