New Delhi, April 12:
Noting that India has correctly assessed US President Donald Trump's objective of imposing tariffs and is attempting to address those concerns, a top geopolitics expert said on Saturday that New Delhi is willing to drastically reduce tariffs in the hope that there will be some reciprocal benefits.

Ashley J Tellis, Tata Chair for Strategic Affairs and Senior Fellow, Carnegie Endowment for International Peace, said that US President Donald Trump's target is increasing market access in India and the administration had tried to negotiate a package to address tariff barriers during the first time. However, that did not come to conclusion.

Speaking at the Carnegie India Global Technology Summit during the session 'Tariffied World: T minus' on Saturday, Tellis said Trump has held strong views about the global trading system for many decades and is now in a strong position to act on those views. He stated that the actions taken in the past several weeks are consistent with complaints that he has had for a long time but there is no grand strategy.

He said there is need to resist the temptation to think that there is a grand strategy with respect to the way tariffs are being used as penalty instruments.

"The President has very strong impulses. He's had very strong views about the global trading system for many decades and now he is in a strong position to act on those views that he has had for a long time. So, in some sense, the actions of the last several weeks are consistent with complaints that he had which predate the specifics that people have, you know, some legitimate concerns about. So resist the temptation to think of this as a master plan that is unfolding in a sort of systematic way. Having said that, and this is the second point, the targets with respect to India are very specific and again they go back to the experience of the first term. With India, the target is increasing market access, and that's really all it is," he said.

Tellis referred to President Trump's 90-day pause on wide-ranging tariffs and "a substantially lowered reciprocal tariff during this period of 10 per cent" on India and other countries which have initiated trade talks with the United States.
"Now they tried in the first term to negotiate a package that would address some non-tariff barriers, but mostly tariff barriers, that did not come to a conclusion and so where he's picked up is literally where he left off. And so India, I think, has assessed his objective correctly and is now attempting to address those concerns that he has about market access by in essence, putting a package that says on a series of line items, India is willing to drastically reduce tariffs in the hope that there will be some reciprocal benefits that come to India. Ideally, those reciprocal benefits come quickly, immediately in the context of this 90-day period," Tellis said.

"In the worst case, they hang out there waiting to be implemented and to my mind it is that asymmetry in time that is going to cause the biggest political problems for the government of India. But at least with respect to India, that is a sort of a logic because it is precise and we know what the objectives are. On the broader objectives of the tariff strategy...I mean, there are too many cross-cutting and contradictory impulses to call it a genuine strategy," he added.

Sinolytics CEO and Co-founder Bjorn Conrad said that China has been preparing for the fight for years and has meticulously built a toolbox. According to him, China has two active cards and a wild card, and the first card makes it difficult for US companies to operate in the Chinese market.

US and China are engaged in a trade war with US imposing 145 per cent tariff and Beijing retaliating with 125 per cent tariff.

Bjorn Conrad said China has not been blindsided by this. "China has been preparing for this, for this fight, for years, but they knew this would be coming at some point. They have been meticulously building the toolbox...written the playbook step by step, and they're now following. They're also following networks step by step...especially in contrast to all the excitement that Trump gives us...in almost boring...Predictability actually makes us China watchers look really, really good at the moment, because it was so easy to anticipate what China's going to do next. It is all written down, it is all written in the book and what are their plan, what cards are they playing."

"China, at the moment, has two active cards, plus a wild card and I am not even counting import tariffs on US goods because I don't think they scare pretty much anyone really, really significantly perhaps except a couple of soybean farmers in the Midwest, but, that's not a real card that China has always knew that they, they don't have it, so they have two other cards that they sharpen.

First card is make life really, really difficult for US companies in the Chinese market, right? and that is a significant card, it does hurt, and they do so by kind of putting them on one of their three sanctions lists, but perhaps even more importantly by kind of needling them with antitrust investigations with the cybersecurity reviews,...these kind of things," he said.
"So, lots of tools around to do that, so first on my list would be watch Apple, see what happens there, Starbucks perhaps, and politically very ultimately very interestingly, Tesla, right. So, all of those could be could be on the mix," he added.
On Friday, China hit back at the latest US tariffs by imposing 125 percent tariffs on imports of all US goods. Chinese official Xinhua agency cited the Customs Tariff Commission of the State Council to state that it will lift the additional tariffs on products imported from the US to 125 per cent from 84 per cent, effective from April 12.

China has also filed a lawsuit with the World Trade Organization (WTO) following the latest US tariff hikes, the Chinese commerce ministry said as per a report in the official Xinhua Agency.

Bjorn Conrad said China's second card is to implement export controls on raw materials for critical minerals. He also mentioned that China's wildcard is its hold over US Treasury bonds.

"Second card. In the long term, much, much more significant from my point of view, export controls on raw materials on critical minerals, and I don't think it has really sunk in how big that card actually is, especially on heavy rare earth minerals. So, rare elements that are basically used and needed for everything that China has a very strong hold on and kind of needed for. I don't know everything from permanent magnets to butter targets for semiconductor production to lasers to optics...yes, of course, the US has with mountain pass they have kind of minerals also to be mined, but those are light rares right and it's not heavy, and heavy is still in China," he said.

"Perhaps, I just mentioned the wildcard that is left as a final point and that is China's hold over US Treasury bonds and USD 760 billion, not as much as a couple of years ago, but still significant and we know how powerful that can be. So, all these cards on the table. The wild card, I think China is conveniently placed at the edge of the table just for everyone to see that it's there but not quite ready to play it," he added.

Answering a query, Shruti Rajagopalan, Senior Research Fellow, Mercatus Center, said she does not think anyone is detached from the global trade system and change in supply chains has its own dynamics.

"So the way we normally talk about trade in this room is trade politics. So all of you have been talking about reactions and you really mean the reaction of a government leader or a minister and so on, right? I'm an economist and when we think about international trade, we talk about reactions of people who actually put things in a bag, put it on a ship, and send it to each other and anyone in this room who's filled out a GST form or a customs folio might be familiar with what we call the HSN classification. This is the harmonised system of or nomenclature that we follow the world over. So for those, for the uninitiated who've been fortunate never to fill this out, the first two digits will be, it's a long number. So the first two digits will be something like cereal and grain for rice, right? The next two digits will specify that it's rice," she said.
"The next two digits will be wholly milled rice or semi-milled rice. The next two digits will say polished or unpolished, and then so on and so forth. And you have, if we start calculating, I had to make a note of this, we have 99 chapters. We have 1,228 four-digit classifications, 5,387 six-digit classifications, and over 17,000 ten-digit classifications. So when we say reaction, We need reaction across these 17,000 different line items that now people need to figure out a new supply chain and these things just don't happen by magic," she added.

Rajagopalan said people will need time to readjust if there are major changes in global system
"I grew up in Delhi about half a mile from here. You all know how far Chandni Chowk is. My mother is still buying her spices from the same place in Khari Baoli that her mother bought spices from and if I request something specific to take back to the US, I'm pretty sure the same shop will send it to me. So our family has not changed its supply chain. So, these things take a long time. So this idea that we can just upend the system and suddenly iPhones will be made somewhere else is entirely unrealistic. You know, you requested me to do this about 20 minutes before the session. I started counting the number of items for iPhones. I stopped at 50 because I don't have time, but in the HSN classification, just the parts of iPhones is more than 50. So this is going to take a while for people to re-adjust," she said.

Source: ANI

India has assessed Trump's objective on tariffs, attempting to address those concerns: Ashley Tellis at Global Tech Summit