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Will Trump’s tariff war spark big-bang reforms in India?

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India has usually turned to economic reforms in times of distress, with the most famous example being 1991, when the country embraced liberalisation in the face of a deep financial crisis.

Now, with US President Donald Trump’s tit-for-tat tariff wars and the global trade upheaval that has followed, many believe that India finds itself at another crossroad.

Could this be a major opportunity for the world’s fifth largest economy to shed its protectionism and further open up its economy? Will India seize the moment, just as it did more than three decades ago, or will it retreat further?

Trump has repeatedly branded India a “tariff king” and a “big abuser” of trade ties. The problem is that India’s trade-weighted import duties – the average duty rate per imported product – are among the highest in the world. The US average tariff is 2.2%, China’s is 3% and Japan’s is 1.7%. India’s stands at a whopping 12%, according to data from the World Trade Organization.

High tariffs increase costs for companies dependent on global value chains, hindering their ability to compete in international markets. They also mean that Indians pay more on imported goods than foreign consumers. Despite growing exports – primarily driven by services – India runs a significant trade deficit. However, with India’s share of global exports at a mere 1.5%, the challenge becomes even more urgent.

The jury is out on whether Trump’s tariff war will help India break free or double down on protectionism. Narendra Modi’s government, often criticised for its protectionist stance, seems to have shifted gears in recent years.

Getty Images India port
Despite growing exports, India runs a significant trade deficit

Last month, ahead of Prime Minister Modi’s meeting with Trump in Washington, India unilaterally lowered tariffs on Bourbon whiskey, motorcycles and some other US products.

Commerce Minister Piyush Goyal has made two trips to the US to discuss a potential trade deal, following Trump’s threatened retaliatory tariffs, looming on 2 April. (Citi Research analysts estimate India could lose up to $7bn annually from reciprocal tariffs, primarily affecting sectors like metals, chemicals and jewellery, with pharmaceuticals, automobiles and food products also at risk.)

Last week, Goyal urged Indian exporters to “come out of their protectionist mindset and encouraged them to be bold and ready to deal with the world from a position of strength and self-confidence”, according to a statement from his ministry.

India is also actively pursuing free trade deals with several countries, including the UK and New Zealand, and the European Union.

In an interesting turn of events, homegrown telecoms giants Reliance Jio and Bharti Airtel have teamed up with Trump ally Elon Musk’s SpaceX to launch satellite internet services via Starlink in India. The move surprised analysts, especially after Musk’s recent clashes with both companies, and came as US and Indian officials negotiate the trade deal.

India’s rapid growth from the late 1990s to the 2000s – 8.1% between 2004-2009 and 7.46% from 2009-2014 – was in large part driven by its gradual integration into global markets, particularly in pharmaceuticals, software, autos, textiles and garments, alongside a steady reduction in tariffs. Since then, India has turned inwards.

Many economists believe that protectionist policies over the past decade have undermined Modi’s Make in India initiative, which prioritised capital- and technology-intensive sectors over labour-intensive ones like textiles. As a result, it has struggled to boost manufacturing and exports.

High tariffs have also fostered protectionism in several Indian industries, discouraging investments in efficiency, according to Viral Acharya, a professor of economics at New York University Stern School of Business.

This has allowed “cosy incumbents” to gain market power by consolidating their positions without facing much competition. As Mr Acharya, a former central banker, noted in a paper by Brookings Institution, restoring industrial balance in India requires “reducing tariffs to increase the country’s share of global goods trade and reduce protectionism”.

With India’s tariffs already higher than those of most countries, further increases could be especially damaging.

“We need to boost exports and a tit-for-tat tariff war won’t help us. China can afford this strategy due to its massive export base, but we can’t, as we hold only a small share of the global market, Rajeshwari Sengupta, an associate professor of economics at Mumbai-based Indira Gandhi Institute of Development Research, said. A trade conflict could hurt us more than others,” she added.

Getty Images Workers walk in front of an Apple iPhone 16 billboard along an under-construction flyover in Bengaluru on January 6, 2025
High tariffs mean Indians pay more on imported goods than foreign consumers

In light of this, India finds itself at a crossroad. As the world undergoes a major shift, India has a “unique opportunity to shape a new vision” for global trade, says Aseema Sinha, a trade expert at Claremont McKenna College.

By lowering protectionist barriers in South Asia and strengthening ties with Southeast Asia and the Middle East, India has the chance to lead in shaping a new trade vision, positioning itself as a key player in a “re-globalised” world, Ms Sinha, author of Globalising India, says.

“By reducing tariffs, India could become the regional and cross-regional magnet for trade and economic activity, drawing in varied powers in its orbit,” she adds.

That could help India create the jobs it desperately needs at home. Agriculture, which makes up 15% of its GDP, accounts for a whopping 40% of employment, reflecting extremely low productivity. Construction remains the second-largest employer, absorbing casual daily workers.

India’s challenge isn’t in expanding its thriving service sector, which already makes up nearly half of total exports, but in dealing with the large pool of unskilled workers who lack the basic skills needed for service jobs.

“While high-end services are thriving, the majority of the workforce remains uneducated and underemployed, often relegated to construction or informal jobs. To provide meaningful employment to millions entering the workforce each year, India must ramp up its manufacturing exports, as relying solely on services won’t address the needs of the unskilled labour force,” says Ms Sengupta.

Reuters Indian farmer in UP
Agriculture, which makes up only 15% of India’s GDP, accounts for 40% of employment

One concern is that reducing tariffs could lead to dumping, where foreign companies flood the market with cheap goods, potentially harming domestic industries.

According to Ms Sengupta, India’s ideal approach to trade would involve a “universal reduction” in import tariffs, as it currently has some of the highest tariffs among its trading partners.

However, there is a caveat: China’s trade struggles, particularly with the US due to the ongoing trade war, could lead to Chinese dumping in India in the “short run”.

“To protect against this, India can use non-tariff barriers against China but only against this one country and only in cases of proven dumping. Barring that, it is in India’s interest to do a wholesale slashing of tariffs,” she says.

There’s also a growing concern that India may be overcompensating in its efforts to flatter the US.

Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), believes that India’s tendency to soften trade policies “based on rhetoric rather than economic pressure” shows a lack of assertiveness in global trade talks.

If this trend continues, he says, India may end up making even more compromises in its trade deal with the US, further “eroding its bargaining power”.

“In comparison to other major economies, India’s pre-emptive surrender on multiple trade fronts – without the US imposing a single country-specific tariff – makes it appear exceptionally vulnerable to pressure tactics.”

The broader consensus seems to be that India should capitalise on what could be the unintended consequences of Trump’s tariff wars. Pranjul Bhandari, chief India economist at HSBC, believes that “potential US tariffs may have become a catalyst for reforms.“.

“If supply chains are rejigged again during the second Trump presidency due to higher tariffs on large exporters, and the world looks for new producers, India may get a second chance,” she writes.

Creating jobs that manufacture goods for the world won’t be easy. India has largely missed the bus on low-end, unskilled factory work – jobs China dominated for decades. Automation is taking over. Without deeper reforms, India risks being left behind.

Taken From BBC News

https://www.bbc.com/news/articles/cd0nr05yxmzo

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‘The bodies just kept coming’ – photographer at deadly Rio police raid

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A photographer who witnessed the aftermath of a massive Brazilian police operation in Rio de Janeiro has told the BBC of how residents came back with mutilated bodies of those who had died.

The bodies “kept coming: 25, 30, 35, 40, 45…”, Bruno Itan told BBC Brasil. They included those of police officers.

One of the bodies had been decapitated – others were “totally disfigured”, he said. Many also had what he says were stab wounds.

More than 120 people were killed during Tuesday’s raid on a criminal gang – the deadliest such raid in the city.

Bruno Itan told BBC Brasil that he was first alerted to the raid early on Tuesday by residents of the Alemão neighbourhood, who sent him messages telling him there was a shoot-out.

The photographer made his way to the Getúlio Vargas hospital, where the bodies were arriving.

Itan says that the police stopped members of the press from entering the Penha neighboorhood, where the operation was under way.

“Police officers formed a line and said: ‘The press doesn’t get past here.'”

But Itan, who grew up in the area, says he was able to make his way into the cordoned-off area, where he remained until the next morning.

He says that Tuesday night, local residents began to search the hillside which divides Penha from the nearby Alemão neighbourhood for relatives who had been missing since the police raid.

Bruno Itan Around two dozen residents of Penha search a hillside for people who went missing after a police raid. Some of them are looking down what looks like a ravine, while others are walking.

Residents of the Penha neighbourhood proceeded to place the recovered bodies in a square – and Itan’s photos show the reaction of the people there.

“The brutality of it all impacted me a lot: the sorrow of the families, mothers fainting, pregnant wives, crying, outraged parents,” the photographer recalled.

Bruno Itan A group of people - many of them women - look at the ground where bodies have been placed. One man is covering his mouth with his T-shirt. A woman is grabbing the shoulders of the woman in front of her and is crying.
There was shock in Penha as locals retrieved more and more bodies from the nearby hillside

The governor of Rio state said that the massive police operation involving around 2,500 security personnel was aimed at stopping a criminal group known as Comando Vermelho (Red Command) from expanding its territory.

Initially, the Rio state government maintained that “60 suspects and four police officers” had been killed in the operation.

They have since said that their “preliminary” count shows that 117 “suspects” have been killed.

Rio’s public defender’s office, which provides legal assistance to the poor, has put the total number of people killed at 132.

According to researchers, Red Command is the only criminal group which in recent years has managed to make territorial gains in the state of Rio de Janeiro.

It is widely considered one of the two largest gangs in the country, alongside First Capital Command (PCC), and has a history dating back more than 50 years.

According to Brazilian journalist Rafael Soares, who has been covering crime in Rio for years, Red Command “operates like a franchise” with local criminal leaders forming part of the gang and becoming “business partners”.

The gang engages primarily in drug trafficking, but also smuggles guns, gold, fuel, alcohol and tobacco.

According to the authorities, gang members are well armed and police said that during the raid, they came under attack from explosive-laden drones.

The governor of Rio state, Cláudio Castro, described Red Command members as “narcoterrorists” and called the four police officers killed in the raid “heroes”.

But the number of people killed in the operation has come in for criticism with the Office of the United Nations High Commissioner for Human Rights saying it was “horrified”.

At a news conference on Wednesday, Governor Castro defended the police force.

“It wasn’t our intention to kill anyone. We wanted to arrest them all alive,” he said.

He added that the situation had escalated because the suspects had retaliated: “It was a consequence of the retaliation they carried out and the disproportionate use of force by those criminals.”

The governor also said that the bodies displayed by locals in Penha had been “manipulated”.

In a post on X, he said that some of them had been stripped of the camouflage clothing he said they had been wearing “in order to shift blame onto the police”.

Felipe Curi of Rio’s civil police force also said that “camouflage clothing, vests, and weapons” had been removed from the bodies and showed footage appearing to show a man cutting camouflage clothing off a corpse.

Supreme Court Justice Alexandre de Moraes has summoned Governor Castro to a hearing on Monday to explain the police actions “in detail”.

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Trump’s Asia tour sees deals, knee-bending and a revealing final meeting

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US presidential trips abroad have traditionally been an opportunity to display the power of the American nation on the world stage. Donald Trump’s five-day swing through eastern Asia, on the other hand, has been a display of the power of Trump – but also, at times, of that power’s limitations.

Trump’s stops in Malaysia, Japan and South Korea over the course of the first four days were an exercise in pleasing a sometimes mercurial American president. It was an acknowledgement that Trump, with the flick of a pen, could impose tariffs and other measures that have the potential to devastate the economies of export-dependent nations.

His sit-down with Chinese leader Xi Jinping on Thursday, however, was something entirely different.

It was a meeting of equals on the global stage, where the stakes for both nations – for their economies, for their international prestige, for the welfare of their people – were enormous.

With China, Trump may flick his pen, but such actions come with consequences. They come with a cost.

For the first four days, Trump’s most recent foray into global diplomacy was smooth sailing.

Each stop was punctuated by a blend of traditional trade negotiations – deals made under the shadow of Trump’s “reciprocal” tariffs – and personal accommodations that at times bordered on the obsequious.

In Malaysia, Trump secured access to critical minerals and made progress toward finalising trade arrangements with south-east Asian nations. He also presided over a treaty that should ease border tensions between Thailand and Cambodia – the kind of “peace deal” the American president loves to tout.

In Japan, Trump’s Marine One flew past a Tokyo Tower lit red, white and blue – with a top in Trumpian gold.

Newly elected Prime Minister Sanai Takaichi detailed $550bn in Japanese investments in the US and offered the American president a gift of 250 cherry trees for America’s 250th birthday, and a golf club and bag that belonged to Shinzo Abe, the assassinated former prime minister who bonded with Trump in his first term.

She also became the latest foreign leader to nominate Trump for his much-desired Nobel Peace Prize.

Not to be outdone, South Korea welcomed Trump with artillery firing a 21-gun salute and a military band that played Hail to the Chief and YMCA – the Village People song that has become a Trump rally anthem.

President Lee Jae Myung held an “honour ceremony” for Trump during which he gave the American leader his nation’s highest medal and a replica of an ancient Korean dynastic crown.

Lunch with Lee featured a “Peacemaker’s Dessert” of gold-encrusted brownies. Later that day, the Koreans served Trump vineyard wine at an intimate dinner in Trump’s honour with six world leaders attending the Asia-Pacific Economic Conference summit.

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Trump caps refugee admissions at 7,500 – mostly white South Africans

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The Trump administration will limit the number of refugees admitted to the US to 7,500, and give priority to white South Africans.

The move, announced in a notice published on Thursday, will apply for the next fiscal year and marks a dramatic cut from the previous limit of 125,000 set by former President Joe Biden.

No reason was given for the cut, but the notice said it was “justified by humanitarian concerns or is otherwise in the national interest”.

In January 2025, Trump signed an executive order suspending the US Refugee Admissions Programme, or USRAP, which he said would allow US authorities to prioritise national security and public safety.

The notice posted to the website of the Federal Register said the 7,500 admissions would “primarily” be allocated to Afrikaner South Africans and “other victims of illegal or unjust discrimination in their respective homelands”.

In the Oval Office in May, Trump criticised South African President Cyril Ramaphosa and claimed white farmers in his nation were being killed and “persecuted”.

The White House also played a video which they said showed burial sites for murdered white farmers. Trump said he did not know where in South Africa the scene was filmed.

The tense meeting came just days after the US granted asylum to 60 Afrikaners. It later emerged that the videos were scenes from a 2020 protest in which the crosses represented farmers killed over multiple years.

On his first day in office on 20 January, Trump said the US would suspend USRAP to reflect the US’s lack of “ability to absorb large numbers of migrants, and in particular, refugees, into its communities in a manner that does not compromise the availability of resources for Americans” and “protects their safety and security”.

The US policy of accepting white South Africans has already prompted accusations of unfair treatment from refugee advocacy groups.

Some have argued the US is now effectively shut to other persecuted groups or people facing potential harm in their home country, and even former allies that helped US forces in Afghanistan or the Middle East.

“This decision doesn’t just lower the refugee admissions ceiling,” Global Refuge CEO and president Krish O’Mara Vignarajah said on Thursday. “It lowers our moral standing.”

“At a time of crisis in countries ranging from Afghanistan to Venezuela to Sudan and beyond, concentrating the vast majority of admissions on one group undermines the programme’s purpose as well as its credibility,” she added.

The South African government has yet to respond to the latest announcement.

During the Oval Office meeting, President Ramaphosa said only that he hoped that Trump officials would listen to South Africans about the issue, and later said he believed there is “doubt and disbelief about all this in [Trump’s] head”.

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