India is the latest target of US economic loss diplomacy

U.S. President Donald Trump imposed 25% tariffs on trade with Russia plus fines on Indian goods, a sharp shift in trade negotiations between American Indians, just as negotiations approached the deadline for Trump’s self-implementation.

Trump’s tariff Salvo stands out from the negotiations to resolve Pakistan through oil deals and tariff benefits to address tensions in India-U.S. relations. Is this sudden shift the product of Trump’s ambitious economic agenda or a mask of strategic signals and trading politics in this trade event?

The latter seems likely given the history of the United States using intentionally exhaustive trade negotiations as a strategic tool to put pressure on other countries, extract concessions or enhance broader strategic goals.

trade

India is negotiating a bilateral trade agreement (BTA) with the United States that began in February. By April, an outline has been proposed that reflects our priorities for reducing India’s trade barriers and addressing its $45.7 billion commodity trade deficit. From February to July, negotiations became tense as India refused to open its agricultural and dairy sectors or to the U.S. market. India also urged tariff concessions, including lower U.S. duties (50%) and aluminum (25%), as well as priority access to labor-intensive exports such as textiles, gemstones, jewelry and IT services. In return, India has shown its willingness to provide greater market access to the United States.

But besides these two hurdles, India has resisted U.S. tariffs on automotive components and the need to accept U.S. federal automotive safety standards, prioritizing its domestic industry and Indian campaigns. Similarly, regarding non-advocacy barriers, the United States criticized India’s quality control orders (QCO) and import regulations, which are seen as barriers to accessing the U.S. commodity market. However, India defends them on the grounds of safety of consumers and domestic industries.

Trump’s negotiation style

As a result, the negotiations have brought potential benefits to both sides, but the costs and controversy are high. This makes them strong and strict and not suitable for Trump’s negotiation style. Trump’s approach to negotiations under Trump (specific trade and tariff issues) is unconventional and urgent.

A recent deal with Vietnam ended in a hurry under pressure. The United States uses tariff threats and long-term negotiations to secure Vietnam’s trade surplus and export dependence to ensure concessions. Despite months of negotiations and goodwill gestures, such as liquefied natural gas (LNG) deals, Vietnam ended up facing a 20% tariff and transfer fine, far less than its proposed 0% reciprocal tariff.

Similar strategies have been seen in countries such as Japan, Indonesia, South Korea and others. These examples illustrate how Washington’s strategy to reach a win-win trade deal, even with allies and partners, how trading diplomacy now integrates their trade relations.

But a closer look shows that economic or trade calculations can drive more than just these transactions. The United States uses these trade deals as geopolitical tools – intentionally detailed negotiations to drive countries to aligne with their strategic goals.

Economic loss diplomacy

Economic loss diplomacy involves using prolonged trade negotiations to force peers to align with geopolitical goals, which is often putting pressure on creating economic uncertainty or exploiting asymmetric dependencies.

The Vietnamese case illustrates this. The United States urges Hanoi to cut its dependence on China’s industrial supplies and curb transshipment directly to serve its anti-China agenda. Negotiations were long, with multiple rounds reflecting extended and detailed dialogues that forced Vietnam to agree to the deal, which had little room for idleness.

Cases in Indonesia and Japan are also worth noting. The United States has put pressure on Indonesia to align its anti-China goal, mainly due to Indonesia’s attempt to diversify trade with BRICS members and a $10 billion investment agreement with China in November 2024.

As far as Japan is concerned, Trump risked bilateral relations through a significant escalation: threatening 25% tariffs, and then actually imposing them on Japanese goods, including cars, to take effect, effective August 1. This is an unprecedented move toward American allies. Japan has generated some discounts under tariff threats and geopolitical pressures due to its trade surplus and burdens of alliance status.

South Korea also faces a tariff threat in July, eventually reaching a “countdown” tariff of 15%, starting from August 1. Despite the unfinished deal, South Korea provides greater market access to U.S. goods, as well as a defense commitment to avoid higher tariffs.

These strategies suggest that U.S. trade negotiations can often achieve a larger purpose: under the guise of economic negotiations, pushing countries to align with their anti-China strategies. These echoes were taken by Washington five years ago when it took advantage of diplomacy with economic loss to China. The United States has tried to curb China’s technological rise by targeting companies like Huawei, putting pressure on China, such as intellectual property theft, and showing its strength to its allies.

During trade negotiations, the United States repeatedly escalated tariffs and put forward complex requirements, including structural changes to China’s economy, extending uncertainty and pressure. Subsequently, China generated some discounts, providing some limited success for the United States.

Positive loss driven by frustration

Unlike other countries facing U.S. standards coercion that has only the tariff threat, India has suffered multiple Salvos – tariffs, fines and a hug on Pakistan. The reason is obvious: Russian factors, trade with Iran and India during trade negotiations.

This positive behavior of loss is inspired by geopolitical frustration, and the United States is familiar with the action. In the 1930s and 1940s, the United States suffered a sense of frustration in its economic loss to Japan, which ultimately led to the 1941 oil embargo, which led to the escalation of World War II. Negotiations have been extended. The United States demanded that Japan withdraw from China and India-China, while Japan sought to recognize its territorial gains, creating a deadlock but without progress.

Similar situations are happening between the United States and India today, where former geopolitical skepticism about India’s relations with Iran and Russia and a deadlock in trade demand. These factors may have caused frustration and drive the United States to convey a strong strategic message by escalating risks and loss, perhaps setting an example on the global stage.

Unconventional tradingism: India must reassess its strategy

India has to read the negotiation table more carefully and patiently, adopting a measured and mixed negotiation style rather than an adversarial approach, which can sometimes frustrate the United States.

When India is looking forward to the prospect of micro-trading by September to October, it should aim to make strategic extensions – concessions with limited progress – rather than procrastination of conversations that won’t really make progress. This will create more room for negotiation and to some extent reduce our frustration.

India must also leverage its geopolitical values ​​and diversify its trade relations with Europe and other countries. This will strengthen India’s bargaining position, ease U.S. demand and stop extreme measures.

Despite the strategic extension, a similar approach was adopted, although there was no agreement with the United States, and despite no agreement with the United States, a measured negotiation strategy was adopted, thus saving South Korea from higher tariffs.

India must remember that Trump is a master who plays unconventional trading cards, where trading is more important than relationships. India should prove that a deal is underway, with something on the table, not empty.

((organizer First, the version of this work was released. )

((Gupta’s own Gupta Edited this. )

The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of fair observers.