Tariffs were trade tool, now are weaponised: FM Sitharaman amid US-India trade talks

Nirmala Sitharaman said tariffs have become weaponised while India and the US continue trade negotiations. She said trade imbalances should be resolved through negotiated market access and reciprocal concessions.

In Short

• Tariffs now weaponised beyond traditional trade talks
• Trade imbalances should be resolved through negotiation
• US seeks to reduce trade deficit; India favours negotiation

Finance Minister Nirmala Sitharaman has said tariffs, which were traditionally used as an instrument of trade negotiations, have now become “weaponised” as countries seek to address trade imbalances through means beyond negotiations.

Speaking at the Munich Security Conference, Sitharaman said the India-US trade agreement was still being negotiated and described it as a “hard and very rigorously negotiated agreement”. She said both sides appeared to have reached a plateau, beyond which giving or taking more could become “very, very difficult”.

“Negotiation used to be the only platform through which countries could highlight the discrepancies, highlight the lopsidedness and say, would we want to correct this? And how would you correct it?” Sitharaman said.

She said the traditional approach involved countries negotiating greater market access, with one side opening up to imports from the other in return for reciprocal concessions.

“Now the imbalance is being sought to be addressed through other means. Where you rightly said, tariff has become weaponised,” Sitharaman said.

TARIFFS NO LONGER JUST A NEGOTIATING TOOL

Sitharaman said tariffs were earlier viewed as an instrument of negotiation and were applied within a certain framework.

“Tariff was an instrument of negotiation. And tariff had a certain framework within which you would apply it. Today, framework is there, tariff some way,” she said.

She contrasted this with India's approach to its trade imbalance with China. Sitharaman pointed out that India's trade deficit with China has grown significantly since 2014 and questioned whether the same principle of addressing trade imbalances solely through measures outside negotiations could be applied to India-China trade.

“I can probably take the same position, can I not? With China, because it's so lopsided. It is terribly against me. But no, you can't,” she said.

Sitharaman said trade imbalances should instead be addressed through negotiations, including discussions on market access and reciprocal concessions.

“You will have to talk it out. You will have to negotiate. You will have to have some give and take,” she said.

INDIA-US TRADE TALKS AT A PLATEAU

On the India-US trade agreement, Sitharaman said negotiations were continuing, but both sides had possibly reached a point where further concessions could be difficult.

“The agreement's negotiations are still ongoing although we'd like to believe that both the sides have reached a plateau beyond which giving or taking might be very, very difficult,” she said.

She added that if there were still areas where both sides could operate, negotiations could continue.

Sitharaman also highlighted the trade imbalance between India and the US, noting that the balance of trade is in India's favour. She said the US would naturally want to reduce the deficit and seek measures that, from its perspective, make up for the imbalance.

She also drew a distinction between how India approaches its trade deficit with China and the way tariffs are being used in current trade negotiations.

“That's the difference, but that's equally the items that you can compare,” Sitharaman said.

- Ends