Sadanand Dhume, a resident fellow at the American Enterprise Institute, said Modi had his own domestic imperatives, which don’t necessarily translate into smart economics.
“In some ways, Modi himself ironically has embraced a Trumpian view of how trade and manufacturing work,” he said. “And that does not augur well for the U.S.-India economic relationship.”
Dhume said that, motorcycles aside, “the real story here, in my view, is the signaling.” Trump, he said, is appealing to his own domestic constituency by pointing out that the U.S. is a largely open economy and India, along with many of the other countries the U.S. trades with, is a relatively closed economy.
“I think he has honed in on that broad truth and I think that has implications for the U.S.-India relationship,” he said. “Because as a signaling device what he’s essentially doing is sending a message to trade negotiators, bureaucrats, the people in the system, trade bodies, that he sees the U.S.-India economic relationship unfairly skewed toward India, and this is something he would like to see changed.”
Indeed, Reuters reported last week that U.S. businesses and diplomats were urging India to reduce tariffs on imported products, which were increased in India’s recent budget. A U.S. State Department spokesperson said “we believe it is important that India make greater efforts to lower tariff and non-tariff barriers, which will lower prices to consumers, promote development of value chains in India, and contribute to India’s objective to become a global competitor across a variety of sectors.”
“Trade benefits both of our countries and we want to see it grow,” the spokesperson said. “We will continue to work to resolve the issues that are preventing the U.S.-India economic relationship from reaching its full potential.”
But India’s complicated trade relationship with the world is unlikely to make that possible. For instance, the U.S. trade deficit with India is about $30 billion (by contrast, the U.S. trade deficit with China is $375 billion). But while India enjoys a trade surplus with the U.S., it has a large trade imbalance of about $150 billion, with the rest of the world—one of the highest of any of the world’s largest economies.
“When you look at it through the [U.S.-India] bilateral lens, India appears to be quite competitive, and if India takes steps to open up trade, it may create a little more parity,” Rossow said. “But from India’s perspective, the U.S. is one of many trading partners, and across the board they tend to have trade imbalances in other countries’ favor—China in particular.”
China is India’s number-one trading partner and enjoys a 5-to-1 trade surplus with India. “From Indian policymakers’ perspective, China is the thing they think about most actively in terms of ‘what's the real threat if we liberalize trade a lot more effectively across the board?’” Rossow said.