Full transcript of “Even if India and U.S. eventually reach a tariff deal, the trust is most likely gone: Expert”. Click a timestamp to open the video at that moment. Need another video? Use the YouTube transcript generator.
0:00 US India ties right now. Uh you you were just out with a piece overnight. Uh you're saying look this it's become just so incredibly politicized now. Uh it's becoming a political football. Is there any sort of offramp? Yeah, I think as Shri was just saying the geopolitics are stunning, but the politics of it on both sides are particularly troubling. The geopolitics are stunning because if you think just back a few weeks, the United States extended its tariff deadline for China. While President Trump imposed a baseline 25% rate on India by tweet and then threatened even more tariffs for things like Russian oil purchases, but also India's membership in the BRICS grouping
0:47 with South Africa, Russia and China. So that's something completely unrelated to the trade space. I think the politics are more troubling and are going to be longlasting and enduring because it's been at least 20 years since the US India relationship has really been a political football in a domestic politics of either country. I was the deputy assistant secretary of state handling US India ties at the end of the George W. Bush administration. You may remember the civil nuclear deal between the US and India. President Bush was a Republican. The Democrats controlled both houses of Congress. Those bills passed by huge bipartisan congressional majorities. On the Indian side, this thing has also been largely postpartisan for the last couple of decades. But in
1:34 the face of these threats from President Trump, his statements, his actions, and his tone, what you see is the media, the Indian public, and the opposition pressing on the government not to show any weakness. And I think even if they reach a tariff deal, which I think ultimately will be likely, the trust is gone and this thing is back in the middle of domestic politics in a way that can be spectacularly unhelpful. Evan, how extraordinary is it that we've gone from a US China trade war to effectively a US India trade war? What does that tell you? Well, it's surprising because I think from the Indian perspective, they're seeing shifts in US policy and from President Trump that really differ from
2:19 the broad bipartisan trajectory they've seen even in President Trump's own first term. I I'll give you a few examples of that. The United States and India had basically disagreed often on one another's relationships with third countries. India, as you know, has objected to many aspects of US policies and relationships with China and with Pakistan. The United States, for its part, has been troubled by India's relationship with Russia, but also with Iran, with Myanmar. But they never let those third-party relationships or concerns bleed back into the bilateral relationship in ways that were very debilitating. All bets on that front are off. The president of the United States is threatening to impose very
3:05 substantial sanctions now on India because of its relationship with Russia. The Indian government views that as both hypocritical because the transatlantic west continues to trade with Russia in other commodities besides oil but also as a kind of blameshifting where the collective failure of the west to stop Putin's war is now being blamed on India. uh for its part uh India also continues to be troubled by the American outreach particularly by President Trump uh to China in ways that India thinks over the long term may not be in its interest. I think that's the challenge is that some of the strategic understandings that enabled the relationship are beginning to fall by the wayside. So to your very direct question, I'd say the very direct answer is the geopolitics of this are pretty
3:52 staggering and a little bit surprising. Could it also be lastm minute efforts before the uh August 8th deadline for Russia to reach some kind of a truth with Ukraine instead of a blame shift? Uh perhaps that this is just an expression of frustration with Putin and pressure on Moscow, not so much on India. What do you think? Well, I think well, I think from the Indian perspective, they have a multi-deade long-standing relationship with Russia. And the idea that they're simply going to throw that by the wayside is not very realistic if you've spent time following Indian foreign policy, negotiating with the Indian government in any area. The United States might have gotten more traction if it if it had done this in a less
4:39 public fashion. That really, in my view, has backed Prime Minister Modi domestically into a corner. There had been signals that India might be prepared to reduce some of its oil purchases from Russia to begin to look elsewhere. That's much harder in this kind of political environment. I think the problem that India faces with President Trump frankly because there have been some suggestions that they could have managed him a little bit differently is that there's not a lot of rhyme reason or logic to the way the president and the administration more broadly is necessarily approaching these negotiations. So you can forgive India for some confusion and some ambivalence. They've tariffed countries with which the US has a trade deficit, but also countries with which the US has a trade surplus. They've tariffed countries with which the United States has free trade
5:25 agreements in place like South Korea and countries with which it doesn't have free trade agreements in place. They've tariffed countries like Korea again with which President Trump himself has reached agreements in the past. And as we were saying earlier, President Trump is teasing the tariff instrument for things that have nothing to do with trade policy, oil purchases, foreign policy, membership in the BRICS group, counter narcotics, immigration. So in that environment, it's very difficult to size up what you're dealing with. And so domestic constituencies really begin to come into play in a constraining way. Brilliant, Evan. I'm so glad you raised that. Earlier this week and let's look at this within the Indian political context. Prime Minister Modi appealed to Indian traders and shopkeepers keepers to return and I find this really
6:12 fascinating to the swadeshi roots of the independent struggle and by Indian to protect the interests of farmers and medium and small enterprises. Are we looking at the beginnings of what could be a backlash in India against the US and are there implications here for US businesses? everything from Nike trainers to iPhones and more recently Teslas. You know, within the the the BJP party and on that end of the Indian political spectrum, there's always been an attraction of some people to this kind of swadeshi so-called swadeshi economics. But Prime Minister Modi going back to when he was the chief minister in Gujarat state in the west was not really known for that. He was always viewed by a lot of people particularly
6:57 multinational companies as being businessfriendly uh welcoming CEOs taking an interest in investment. In his first term in particular there was a lot of euphoria about potential reform trajectory um uh welcoming multinationals welcoming investment and indeed Prime Minister Mod's emphasis on so-called make in India policies was designed not just to indigenize things but also to attract foreign investment. So I think in the context of his own history and track record that that's a little bit surprising. Having said that, I do think American companies are worried that they're going to be in the crosshairs because there are no winners in a trade war. And as this thing begins to spiral downward, you mentioned defense as an example. industries,
7:43 sectors and US firms that have led the way may find themselves being punished and also their sectors and their possible contracts being politicized in ways that they would not have expected a few years ago. If I can also say there's also an inherent contradiction between President Trump's emphasis on America first and Prime Minister Mod's emphasis on making in India. It's very difficult to square that circle. And when the president of the United States goes on television and says that he's extremely unhappy with Tim Cook and Apple for making things in India because they should make everything in the United States, it's harder still to see how the government of India is going to square that circle in a way that's going to mllify the president and his America first approach. That's a challenge and firms are going to get in the crosshairs of that. Yeah. Evan, if we can take a step back
8:30 and also take it up to 30,000 ft. I mean, I'm wondering, you know, is this all about the president's frustration, uh, with Russia, with Putin, uh, you know, and and and the the the the collective West failure to try and resolve the situation, uh, visiting Russia and Ukraine and looking around for a whipping boy. And the fact of the matter is, I mean, they're not going to be able to do the same thing with China, right? Because China's holding the rare earth's card. So unfortunately India has become uh the whipping boy because well I guess Trump is able to. Yeah. I mean that hasn't been lost on anyone in India. They say you know you talk to us about our oil purchases. What about China and its oil purchases? And by the way if we switch up the commodity of reference from oil to let's say gas
9:16 European Europeans continue to buy Russian gas. And if you switch to certain other chemical elements or chemical precursors, the United States continues to trade with Russia as well. So as you're implying, this is viewed in India in many circles as being at minimum hypocritical, but in any case as somewhat cynical. President Trump, you know, the la it's hard to know what motivates him. The last time I was on your show, I compared him to alternate side of the street parking in New York City. You know, Monday, Wednesday, Friday, he's on one side of the street. Tuesday, Thursday, Saturday, he's on the other side of the street. You never quite know what you're going to get. I mean, this is a guy who wouldn't sell weapons to Ukraine not so very long ago, and now suddenly he's talking about how India is somehow enabling the war. So, I think that's part of the challenge that foreign governments face, but it's also
10:04 why he's somewhat unpredictable and difficult to negotiate with. I do think there's some frustration uh in the Trump administration with India's barriers, tariff barriers, non-tariff barriers, lack of structural reforms to things like factor endowments and other investment related areas that American and other firms have sought. But there's plenty of frustration on the Indian side too. And as for example, a new American technationalism is taking hold, a lot of people in the administration want to hold technology close and inside the United States. And that was the fastest growing most rapidly advancing area of the US India relationship. That's disappointing to people on the Indian side too. So it's a challenge. You know in this conversation we use the word frustration uh several times here Evan and I think there is a lot of
10:51 frustration in some of the major trading partners of the US such as Japan and South Korea given um you know how the how they really need to manage between domestic audience and the Trump administration and they need to sort of um you know finalize their trade negotiation. Now Tree just mentioned by India kind of a message coming from Modi. Do you see uh the possibility of some kind of a spillover effect, economic nationalism sort of playing out in other parts of the region? Um well, I think other parts of the region are a little bit different. I mean if you're if you're I mean South Asia so India's immediate neighborhood is actually one of the least economically integrated regions of the
11:36 world and many natural economic constituencies within South Asia um you know have really dissipated over uh many many decades. East Asia including Southeast Asia is a little bit different and I think um one of the tragedies in India is that it's had trouble really taking advantage of some of the supply chain and other shifts that are happening both as China moves up the value chain but also as investment is to flow is flowing into other competitive economies in Asia because uh of lack of integration both through trade packs but also through industrial connections. There are exceptions to that. Some of the southern Indian states uh have really been in the lead. But broadly
12:23 speaking, there's a reason that China has a larger share of the trade picture among ASEAN economies than India does. um and being outside the regional comprehensive economic partnership which was hugely controversial in India politically and you'll recall that India withdrew largely because it was viewed in India as a kind of free trade agreement with China that would be a sop for Chinese dumping into India nonetheless left India on the outside of a tariff wall that uh East Asian economies are on the inside of so by trying to protect what it had rather than trying to create new opportunities in East Asia India which faces a lot of competition from other rising Asian economies. You know, the Vietnams, the Thailand, the Indones, the Malaysia, I think isn't as well positioned as maybe it could be. Having said that, it's a
13:09 huge domestic market, and that's partly what Prime Minister Modi is trying to get at. When you have 1.4 24 billion people. You do have domestic opportunities at scale that they don't have in say a Malaysia.
