The tariffs imposed on Indian goods by US President Donald Trump, which have gone almost to 50% have left everyone reeling a bit. Former RBI Governor Raghuram Rajan has also spoken about this, giving insight into why the US is imposing such tariffs not just on India, but overall, and how India is definitely being targeted specifically.
Over the months since they were announced till the August deadline, experts and analysts have been trying to figure out not only how this will impact the Indian economy, but also why such high tariffs are being imposed, considering the otherwise impression of friendship being shown between Trump and Indian Prime Minister Narendra Modi.
What Did Raghuram Rajan Say?
Raghuram Rajan, the former Reserve Bank of India Governor, has recently spoken about the relationship between India and the US, especially in light of the tariffs placed on the country’s exports by US President Donald Trump.
In an interview with Rajdeep Sardesai of India Today TV, Rajan spoke about how these tariffs are not just a trade tool but also a power move by the US.
Claiming that there are various reasons behind the push of these tariffs, Raghuram Rajan said, “I think certainly he believes that a current account deficit, trade deficit is evidence that other countries are taking advantage of the United States rather than sending goods cheaply to the United States, which the US consumer benefits from.”
Despite India’s image as a strategic U.S. partner, Rajan agrees that India has been singled out, even among other Asian countries, saying, “It is. I think there’s no true questions about that”.
He notes that while many Asian nations face tariffs of nearly 20%, India was initially hit with a base rate of 25%, which then doubled to 50% with the added levy, despite India was initially supposed to be placed in the lower category.
Rajan said, “We would look different, and we would be on a level playing field. Of course, there was a hope that the special Modi-Trump relationship would yield something even better. But at least we would not look worse if that had played out.”
Read More: What Will Get Cheaper And What Will Get Expensive For Indians After US-UK Tariffs?
He also added, “The fact that the Indian tariffs have been set at 25, the base tariffs, even while other countries are much lower in Asia, makes India disadvantaged. So the relationship clearly has broken down.”
When the topic was raised about whether this could be due to India’s trade of oil with Russia, Rajan claimed that those are not the real reasons, and it’s just a power move at this point.
It must be noted that even countries like China, which the US considers a fierce competitor, and the European Union, despite their ongoing energy ties with Russia, have not faced similar retaliation from the US.
Rajan said, “I think we are beyond issues of fairness, sovereignty, etc. We are talking about a situation where it is a power play.”
He claimed that this is due to Trump thinking that since India is “not playing by the rules that he says,” then the country “needs to be singled out.”
He also brought up the Financial Times article of US adviser Peter Navarro and said how “Navarro would not write in the Financial Times without permission. And he has been permissioned,” suggesting that the US government is clearly doing anything and everything to make India bend to their demands.
Rajan also added that this should be a “wake-up call” for the Indian government, and becoming dependent on a single country should be avoided.
He said, “This is a wake-up call. Let us not become dependent on any single country to a large extent. Let us look east, to Europe, to Africa, and continue with the US, but unleash reforms that will help us achieve the 8–8.5% growth needed to employ our youth.”
He also pointed out that for Trump, these tariffs are a tax on outsiders and not Americans, stating, “Therefore it’s (the tariffs) a cheap way of getting revenues, which can then help offset some of the tax cuts that he has made.”
Rajan spoke about how this is a mindset Trump has held since the 1980s and believes that pushing for such tariffs is not just a way to level the playing field, but also “It can be a way for the US to essentially use force when it doesn’t want to use its military.”
Adding that it often ends up with the “other countries” suffering.
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Sources: Mint, India Today, The Economic Times
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