2 weeks Ago By Bloomberg Opinion
Credit: Bloomberg The US president-elect’s proposed import tariffs threaten to throw the world’s production networks into disarray. They are also expected to feed into American consumer prices and slow the pace of rate cuts by the Federal Reserve. A more severe impact on Chinese exporters may bring some benefits to Indian rivals, though any gains in market share may be short-lived if Beijing allows the yuan to weaken significantly against the dollar.
Besides, a tough-on-trade Trump won’t leave India unscathed. There’s plenty of reason to suspect that the incoming administration will push New Delhi hard on behalf of US technology firms. In 2019, Trump had cut some duty-free imports from India under a decades-old Generalized System of Preferences because of an alleged failure to provide “equitable and reasonable” access to its market.
That was just a light rap on the knuckles. This time around, the stakes are higher. Elon Musk, whom Trump has anointed as the co-head of a new department of government efficiency, may have a direct interest in more than one such conflict around access.
Musk’s Starlink Inc. is hopeful of offering satellite broadband services in India, for which it wants the government to set a fee. New Delhi seems amenable to the idea, but dominant local tycoons, Mukesh Ambani and Sunil Bharti Mittal, are opposed.
They’re demanding a competitive auction to ensure parity between satellite and terrestrial mobile spectrum. The lobbying is getting intense. Starlink’s ties to the US intelligence and military establishment make it a “wolf in sheep’s clothing,” a New Delhi-based think tank said this week.
And that may be just one area where powerful domestic players will want to protect their turf even as Trump puts pressure on New Delhi to open up the market. For years, Tesla Inc. and the Narendra Modi government have unsuccessfully courted one another over a proposed electric-vehicle factory.
In March, India slashed its EV import duties, hoping to buttress Modi’s reelection campaign by getting the Tesla boss to visit. Yet, Musk was a no-show, and his India factory plan is all but dead. Indian demand for battery-powered cars may be too insignificant at present to merit an all-out trade war.
But that will change as the charging infrastructure falls into place. Still, Trump will need to be cautious to not press Modi too hard. Even China’s BYD Co.
is keen to make EVs locally; it’s waiting for warmer relations between Beijing and New Delhi for its joint-venture proposal to be approved. A multi-cornered contest in which US tech leaders are lobbying Washington for access, but some Indian enterprises are pushing New Delhi for a restricted market while others are pitching on behalf of their Chinese partners, can get messy. Instead of inadvertently bringing business interests in the rivals closer together, it’s probably best if Trump lets Modi sort out the slowdown in the domestic economy first.
Thanks to India’s soaring income and wealth inequality, there will be plenty of EV buyers in the years ahead. It’s the vast bottom of the pyramid struggling to afford a decent meal that needs urgent attention via a rekindling of broad-based growth in jobs and incomes. Let authorities deal with tomatoes first.
Trump and his tariffs can wait..
