President Donald Trump has China in his crosshairs – and free-traders here holding their breaths – as he prepares to deliver a capstone speech to the World Economic Forum in Davos on Friday. But a Trump-led confrontation with India over trade could also nose its way into the great-powers showdown heating up the conference’s otherwise studied cool.
Indian Prime Minister Narendra Modi delivered a paean to free trade Tuesday in a speech that formally opened this year’s gathering.
He took some swipes at Trump’s “America First” approach in the process, declaring that “instead of globalization, the power of protectionism is putting its head up.” Yet Trump’s trade hawks have been quietly building a case that Modi’s government is engaged in precisely the sort of unfair trade practices that the leader decried.
The administration’s maneuvering on India, led by U.S. Trade Representative Bob Lighthizer, has paled by comparison to the brewing fight with China. Trump fired what could prove the opening salvo of a trade war with the Chinese on Monday (though he denies it) by slapping tariffs on imported solar panels and washing machines. The United States ran a $24 billion trade deficit with India in 2016, a fraction of our $347 billion imbalance with China that year, though the figure has more than doubled over a decade.
American businesses across a range of sectors have lodged a long list of complaints about their treatment by Modi’s government: Harley-Davidson faces a 100 percent import duty there; Apple just got pinched by a hike in the tax on imported phones; General Electric says India demanded midstream changes to a multibillion-dollar contract to build diesel locomotives; medical device makers are subject to price controls; and American purveyors of everything from flowers to alcohol confront steep tariffs.
Lighthizer pressed the case last year, raising concerns directly with Modi when the prime minister visited Washington in June and then in a trade forum with India in October that yielded no apparent progress. At the end of the year, as Lighthizer’s office remained conspicuously silent, Congress allowed a law that waives tariffs on imported goods to lapse. India is the prime beneficiary, tapping it to export $4.7 billion worth of goods to the United States in 2016, according to USTR.
A USTR representative declined to comment about Lighthizer’s plans to follow up in Davos, as did a Commerce Department spokesman. A White House spokesman said only that Trump has no plans to meet with Modi at the conference.
National Economic Council Director Gary Cohn has tried to hold the line internally against the trade hawks and on Tuesday sought to clarify Trump’s approach. “America First is not America alone,” he said. “We are very open to free, fair, reciprocal trade . . . It’s hard to argue against that, that we should treat each other equally.”
Trump’s tariff smackdown seemingly threw Modi’s free-market appeal, delivered to the global elite, into sharper relief. But it came as India considers setting up its own barriers to Chinese solar panels: The nation’s Finance Ministry this month pitched imposing a 70 percent duty on imports of the goods.
“While Modi himself is well-liked by the private sector because he’s so much more business oriented than his predecessors, there’s still a lot of skepticism,” Eurasia Group President Ian Bremmer writes in an email.
Bremmer adds that although the United States has a deeper strategic alignment with India than with China, the latter is better positioned to stand up for itself, which could shape how the trade fights play out.
“The U.S. has more leverage on these economic issues with a country like India than it does with China. If the U.S. tries to lash out at China, China is going to hit back hard. India doesn’t have the same type of economic firepower,” he said. “Ultimately, size matters in this case.”
FOX Business tweeted “National Economic Council Director Gary Cohn: ‘President Trump’s economic agenda has unleashed the U.S. economy and we are growing. His policies have led to a rising stock market, low unemployment, and strong GDP growth.'”
Back at home Tuesday, Cohn argued at the White House lectern that Trump had “unleashed the U.S. economy” with his economic agenda, including slashing corporate tax rates. “At the [WEF], we will reiterate America’s commitment to domestic and global economic growth and prosperity, strengthen close ties with other world leaders, and catalyze international business support for the president’s agenda,” he said.
But a peek at the message Cohn and Trump may deliver when they hit town came through when the Goldman Sachs alumnus argued that “the president will continue to promote fair economic competition, and will make it clear that there cannot be free and open trade if countries are not held accountable to the rules.”
Cohn, along with national security adviser H.R. McMaster, revealed more details about the president’s trip to Davos, saying that Trump arrives Thursday morning and will meet with WEF founder Klaus Schwab, who will host a reception for Trump on Thursday night. Trump will meet with “a variety” of world leaders and dine with European business executives (“to encourage them to continue to invest in America.”)
From McMaster: “The President will also use his time in Davos to discuss other national security issues, including the international effort to denuclearize the Korean Peninsula, our coalition to defeat ISIS, our efforts to counter Iran’s destructive agenda to perpetuate violence across the greater Middle East, as well as Iran’s ballistic missile activity, and the fundamental flaws in the Iran nuclear deal.” McMaster mentioned sessions with British Prime Minister Theresa May, Israeli Prime Minister Benjamin Netanyahu, Rwanda’s President Paul Kagame (also the head of the African Union); and President Alain Berset of Switzerland.
Parting shot: When asked what Cohn, a Davos veteran, would surprise Trump about attending the infamous gathering for the first time, the president’s top economic adviser simply pointed to the “14 feet of snow” on the ground here. “And I’ve never seen 14 feet of snow there, either. So, it will be interesting to see.”