Trumponomics of ‘Smart Trade’:  Unfair Trade Practices vis-à-vis China and India

Emperor Trump

Is the world economy poised to enter the phase of what the Dutch trend-watcher Adjiedj Bakas called ‘Slowbalisation’? The trend forecasts say that the world will soon witness another spell of ‘financial crisis’ with Donald Trump unleashing a trade war on emerging economies like China, India etc and with the worsening conditions in European Union. During the past three decades, there has been a phenomenal increase in the cross-border flow of goods and services, migration etc which impacted/reshaped the relations between states, both small and large, with significant consequences for the domestic conditions of all countries. However, the pace of globalisation, over years, has showed multiple effects—slowdown, recession and setbacks in commodity trade. Most importantly, the US—a leading protagonist of globalisation for decades—has now become utterly cynical (and even self-critical of its own trade policies in the past). Trump is now seen by the ultra-rightists as the ‘new hope’ of America in the 21st century. Trump and his policy experts argue that the US exporters have been facing progressively higher tariffs in the markets of more than a hundred American trading partners. They call it ‘non-reciprocity’ and the unfavorable ‘stupid trade’ is evident from big markets in China, India, European Union, South Korea, and Vietnam to smaller markers in Algeria, Zimbabwe etc. Hence what Trumponomics promotes is a sort of new mercantilism with a popular slogan ‘Smart Trade’ and ‘Fair Trade,’ replacing the much-avowed ‘Free Trade.’ The major objective of Trumponomics is to bring back ‘Protectionism’ to help regenerate the American industries from external competition. It also seeks to bring down the U.S tariff deficits with other countries such as China, India, EU countries etc. The expectation is that once the US companies become richer, they can help rejuvenate the American military power by generating higher taxes from them.

When the fourteenth meeting of the G-20 (Osaka summit) is held on 28–29 June 2019 in Japan, one of major issues of the current global economy will be the growing feud between the US and China on trade, investment and the application of ‘fair rules’ to economic practices. Even as the US-China trade deal negotiations collapsed, Trump increased the existing tariffs from 10 per cent to 25 per cent on US$200-billion worth of Chinese exports to the US. Trump sought to pressurize Beijing to make structural changes to remove forced-technology transfers and intellectual-property theft etc. However, China did not respond positively. Rather, it imposed higher tariffs on American imports. This scenario of ‘tit-for tat’ has the potential to worsen the situation. Trump also warned that he would again place higher tariffs on the remaining two-thirds of Chinese exports if the latter resorts to further retaliatory measures. It was only recently that Trump signed an executive order barring American companies from using information and telecommunications equipment made by companies that pose a ‘national-security’ risk—generally seen as a ban on doing business with multi-billion Chinese telecom Huawei. Huawei has been trying to pressurize the Western countries to let them become a partner in the next generation 5G networks. Trump’s executive order torpedoed this prospective business of Huawei.

For India too, the emerging scenario is not reassuring, notwithstanding a relatively comfortable relationship with the US under Trump. The ‘Modi 2.0’ cabinet is now under pressure from the situation of lower GDP growth rates, on the one hand, and the new measures put in place by the US administration on the other. The latter one is no good news for the new dispensation of Modi. It was shocking news that Trump suddenly terminated India’s designation as a beneficiary developing nation under the key Generalized System of Preference (GSP) trade programme after determining that it has not assured the US that it will provide “equitable and reasonable access” to its markets. The GSP is seen as the largest American trade preference regime—put in place with a view to promoting economic development by allowing duty-free access for a range of products from the beneficiary countries. In an executive proclamation, Trump said that since India “has not assured the US that it will provide equitable and reasonable access to its markets… it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.” This was done after a 60-day notice.  Apparently, the new government’s task now is to “ensure that the US companies have a level-playing field” in India. As per the new Trump proclamation, as many as 2000 Indian products (which include auto components, textile materials etc) cannot enter the US market under the GSP eligibility criteria. Reports say that India was the largest beneficiary of the GSP in 2017 with $5.7 billion in imports to the US given duty-free status. With the new decision, the trade with the US will cost over US$ 300 million.  Though officials in India argue that Trump’s move will not have a significant impact on exports to the US, the action tends to affect India’s overall trade performance.

US-India Bilateral Trade and Investment

The U.S. goods and services trade with India was estimated to the tune of  $142.1 billion in 2018 (exports were $58.9 billion and imports were $83.2 billion). The U.S. goods and services trade deficit with India was $24.2 billion in 2018. India is currently US’s 9th largest goods trading partner with $87.5 billion in total (two way) goods trade during 2018. Goods exports totaled $33.1 billion; goods imports totaled $54.4 billion. The U.S. goods trade deficit with India was $21.3 billion in 2018. Trade in services with India (exports and imports) totaled an estimated $54.6 billion in 2018. Services exports were $25.8 billion; services imports were $28.8 billion. The U.S. services trade deficit with India was $3.0 billion in 2018.

According to official sources, India was the United States’ 13th largest goods export market in 2018. American goods exports to India in 2018 were $33.1 billion, up 28.9% ($7.4 billion) from 2017 and up 87.3% from 2008. American exports to India account for 2.0% of overall U.S. exports in 2018. India was the United States’ 10th largest supplier of goods imports in 2018. As such the U.S. goods trade deficit with India was $21.3 billion in 2018, a 7.1% decrease ($1.6 billion) over 2017. The United States has a services trade deficit of an estimated $3.0 billion with India in 2018, down 32.5% from 2017. U.S. foreign direct investment (FDI) in India (stock) was $44.5 billion in 2017, a 15.1% increase from 2016. U.S. direct investment in India is led by professional, scientific, and technical services, manufacturing, and wholesale trade.  India’s FDI in the United States (stock) was $9.8 billion in 2017 (latest data available), up 11.5% from 2016. India’s direct investment in the U.S. is led by professional, scientific, and technical services, manufacturing, and depository institutions. Sales of services in India by majority U.S.-owned affiliates were $27.0 billion in 2016 (latest data available), while sales of services in the United States by majority India-owned firms were $17.0 billion (U.S., Office of the US Trade Representative 2019).

However, the fact that the Trump regime does not reveal the ‘strategic dimension’ of bilateral relations (and its costs and benefits) is worth pondering. While the top US corporations continued to gain from their business within the country in diverse sectors (by exploiting both labour and local markets), the defence deals between the two countries reached new heights. It is estimated that these deals will touch US$ 18 billion in 2019 and the deal for setting up of six nuclear power plants in India (in partnership with the Westinghouse Electric Company) will cost much higher investments. The nuclear deal was clearly reiterated in the India-US 2+2 dialogue held last year (India, Ministry of External Affairs 2018). It was already evident since the last meeting that India would be forced to open the door for a flood of American goods, particularly the strategic weapons and ‘high technologies,’ given the nature of commitment that India has made. India was already elevated to the status of “Tier-1’ of the ‘Strategic Trade Authorization’ (STA) regime (Seethi 2018).  It may be noted that the US had announced “immediate funding to seed new strategic initiatives in the Indo-Pacific region.” The Department of Commerce, by granting Strategic Trade Authorization Tier 1 status to India, enabled American companies to export more high-technology items under a streamlined license exception” (US, White House 2018). The US Secretary of Commerce Wilbur Ross made it clear last year that “India’s status as a Major Defense Partner will allow it to receive more U.S. high technology and military items without individual export licenses. STA Tier-1 treatment, comparable to NATO allies, will expand the scope of exports subject to the Export Administration Regulations (EAR) that can be made to India without individual licenses.” This regulatory change was expected to “enhance the bilateral defense trade relationship and result in a greater volume of U.S. exports to India.  Over the last seven years, approximately $9.7 billion worth of licensed exports to India may now be eligible for export under this license exception” (Ibid). Thus, the fact that whatever deficit in bilateral trade has been offset by other deals and commitments from the Indian side is often sidetracked by the Trump administration for fresh bargains.

It may be noted that while the Trump administration is capitalizing the ‘goodwill’ between India and the US across an array of sectors (including in the ‘containment China’ project), its approach on bilateral trade issues with New Delhi exhibits a patron-client pattern. On one side, China is seen as a threat to its global hegemony and, on the other side, India is expected to play its role as a junior partner (of the US strategic games) in different theatres of conflict with China. The G-20 Osaka summit is likely to witness this double-talk of the Trump administration.


India, Ministry of External Affairs (2018). “Joint Statement on the Inaugural India-U.S 2+2 Ministerial Dialogue,” 6 September, available at

Seethi, K.M.(2018): “2+2 Dialogue = Withering Away of India’s ‘Strategic Autonomy’?” Countercurrents, 6 September, available at

US, Office of the US Trade Representative (2019): U.S.-India Bilateral Trade and Investment,” available at

US, White House (2018): “President Donald J. Trump’s Administration is Advancing a Free and Open Indo-Pacific,” 30 July, available at


This write up has also appeared in the Global South Colloquy(   

The author is Dean of Social Sciences and Professor, School of International Relations and Politics, Mahatma Gandhi University, Kerala. He can be reached at [email protected]


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