There’s a world beyond those stars and stripes

Even as the Oval Office shows signs of cabin fever, America’s inward lurch has shaken the high seas, sending shudders all around the globe. India stares at a 25% ‘reciprocal’ tariff, plus a punitive levy, placing us in the club of shunned nations, with our access to the US market for medical pills and digital devices at risk of denial too. Many of our export rivals face lower levies, but Trump’s deal-takers have had to buy this ‘privilege.’ 

Also Read: Andy Mukherjee: Trump’s tariff shock puts India in a tight spot but it has space to manoeuvre

What price New Delhi is ready to pay would be based on a political-economy calculus as much as our exposure to frayed US ties. In a no-pact scenario, almost one-seventh of our export cargo will face headwinds. But this only forms a thin slice of overall output, so it’s likely to slow GDP growth by no more than a low fraction of a percentage point, the kind we often see in data revisions. 

But then, as a few large labour-intensive sectors seem bound for hard times, job losses are the bigger worry. Beyond that, it revives a decades-old debate on how best to  globalize—or whether we should at all.

Also Read: Mint Quick Edit | Trump’s tactical rant: Don’t let it work

Notably, self-reliance has re-asserted its value, making India’s ‘atmanirbhar’ call sound prescient. Over the weekend, Prime Minister Narendra Modi referred to global instability while urging citizens to buy home-made goods in tribute to Mahatma Gandhi, whose spinning wheel is an icon of relying on oneself. In policy terms, our focus on domestic drivers of output must intensify. 

Supply-side action, as with our infra build-up, could extend to public sector units investing in factories to stimulate economic activity. To draw private players in, the Centre could make strategic investments in emergent fields. Eventually, though, self-driven expansion will need to be privately led, for which we must resolve the stubborn drag of deficient demand. For all enterprises to thrive, we need a path of less exclusive prosperity—an admittedly Sisyphean ask amid tech advances that empower capital over labour even more.

Also Read: The long arc of an India-US trade deal could end in a win-win

Given our growth imperative, what New Delhi must not do is drop its telescope scanning the horizon for export markets. Nor give up on world trade talks. So, even as we seek to sign new bilateral pacts, we should urge all nations to retain norms that ease business across borders. The US accounts for only a little more than a tenth of global trade in merchandise. 

This could shrink if America’s general cost base rises, its producers slouch behind a tariff shield and the dollar loses appeal, even as Asia booms by investing in freer trade for efficiency gains in resource allocation across half the globe. While the US looks likely to retain its dynamism in hot fields of innovation, factory action may elude it. If an integrated East gets an even sharper edge as time rolls on, we may well have to vie for value chains within Asia, which would call for head-on rivalry with Asia’s best, rather than limiting our game to select two-way deals that avoid overlaps in what goes to and fro. 

In other words, whether or not a deal works out with the US, we must remain ready to globalize further. Let’s keep our strategy flexible and a reform path handy to become globally competitive. Free trade can survive Trump’s rupture.