Not a word, no Nobel support: How PM Modi got Trump to cut tariffs and trade deal
PM Modi, without any confrontation or provocation, let patience do the heavy lifting. Eventually, the US's loudest dealmaker blinked, without PM Modi having to say a word or resorting to massaging Trump's ego.
At last, both the tone and tariffs against India have been brought down by Trump. And Prime Minister Narendra Modi, like a true Gujarati with a strong understanding of business, managed to do it by maintaining a strategic silence and through tactical diplomacy -- which spoke the loudest. And to top it all, without any flattery or Nobel Peace Prize endorsement. India walked away with not only one of the lowest tariff rates at 18%, lower than those of China and Pakistan, but also had the additional 25% levy on Russian oil purchases dropped.
The whole saga, which saw India-US ties reach their lowest ebb, underscored how PM Modi, without any confrontation or provocation, let patience do the heavy lifting. Eventually, the US's loudest dealmaker blinked -- without PM Modi having to say a word or resorting to massaging Trump's ego. Crucially, PM Modi chose not to play on Trump's terms. Ask US Commerce Secretary Howard Lutnick, and he would tell you how India "missed" a trade deal window just because PM Modi did not personally call Trump last year.
However, the details of the deal remain unclear, with differing narratives emerging from Trump and Modi. There was no mention by PM Modi of a trade deal being reached, or claims about stopping Russian oil purchases or the $500 billion commitment to buy American products that Trump tom-tomed in his post. In perspective, US goods exports to India in 2024 were just $41.5 billion. Scaling it to $500 billion will take years, if not decades.
It is, however, clear that an 18% tariff will make Indian goods like textiles, gems, and leather more competitive again.
While who benefited the most from the trade deal will be clear once the finer details are revealed, the reduction in tariffs no doubt marks a diplomatic win for PM Modi after months of constant public jabs from Trump and his aides.
WHY TRUMP REDUCED INDIA TARIFFS?
So, what was the trigger? Let's get it straight. India today has an economy too large and too dynamic to be easily cowed by Trump's tariff and trade threats. Despite being labelled a "dead economy" by Trump, three major countries and the European Union (EU) rushed to seal trade deals with India. It created a positive aura, reinforcing India's image as a reliable and stable partner in comparison to a hostile US.
Last year, the UK, New Zealand and Oman secured trade deals with India amid the trade volatility wrecked by Trump. The cherry on the cake was undoubtedly the India-EU 'mother of all deals' signed last month. In fact, analysts pointed out that it likely put pressure on Trump, making him blink first in the trade tussle with India.
The flurry of trade deals gave India the cushion to dig in its heels and strengthened its negotiating hand in its trade negotiations with the US. India became the go-to partner for countries snubbed by Trump. It gave India the confidence to stand firm on its red lines in not allowing wider access to its dairy and agriculture sectors.
However, despite being firm, PM Modi handled the issue of tariffs maturely and pragmatically. Neither Modi nor senior ministers like S Jaishankar joined the war of words with Trump since the 50% tariffs kicked in.
HOW INDIA AVOIDED THE TRUMP TRAP?
India read the US President right very early. Trump thrives on provocation, spectacle and likes to dictate the script. PM Modi avoided the theatre of confrontation and the drama that Trump uses to sustain his MAGA persona.
In fact, PM Modi avoided as many as four calls from Trump after the tense June 17 conversation where he pointedly denied his role in the India-Pakistan ceasefire and refused to engage on his Nobel Peace Prize ambitions. It left Trump with a bruised ego and came a 50% tariff.
This was backed by a report by Jefferies, a US financial services company, which said Trump's "personal pique" was behind the hefty tariff on India.
On the other hand, Pakistan's willingness to give Trump the credit he sought helped it reset its ties with Washington. At the centre of this reset was Pakistan's army chief, Field Marshal Asim Munir, who cultivated a relationship with Trump built on minerals, crypto deals and strategic leverage.
As Trump talked tough and the optics with Pakistan played out, PM Modi stuck to the long game. India kept back-channel talks on with the US and did not let ties rupture.
THE CHINA, RUSSIA OPTICS
However, India did not show that it was rattled, diversified its trade and made more public overtures to China and Russia. In fact, PM Modi visited China for the first time in seven years to attend the Shanghai Cooperation Organisation (SCO) last year and met Xi Jinping and Russian President Vladimir Putin.
Visuals of PM Modi, Xi, and Putin laughing and exhibiting newfound camaraderie unsettled Trump. "Looks like we've lost India and Russia to deepest, darkest, China," Trump, like a jilted lover, wrote in a post. Again, minimum words, maximum impact.
Two months later, in December, PM Modi hosted Putin in a grand state visit, and the two sides announced a slew of agreements. The overtures carried much symbolism and signalling. India's strategy of hedging by engaging all major powers was paying off.
It is not that India did not retaliate. Apart from reducing its US dollar exposure in trade, India also silently imposed a 30% tariff on US pulses. Here, silence did not denote the absence of action, but more of avoiding distraction. A chest-thumping announcement may well have irked Trump and prolonged the tariff tussle.
In the face of Trump's noise, PM Modi tactfully responded with poise. It seems to have been the most powerful sound of all as tariffs fell from 50% to 18%.