ET Analysis: India must leverage US President’s tariff flexibility clause

non-reciprocal trading arrangement. Here, India has an early mover advantage that it needs to drive home at the earliest.

India is among the few countries with which the Trump Administration has already announced and progressed talks on a trade deal. It’s probably the first country to which the USTR has sent delegation to negotiate and by all accounts, the conversation is now at advanced stage.

From Trump’s perspective the modification authority clause — Section 4 of the tariff order under the International Emergency Economic Powers Act – provides him with an effective bargaining chip in a trade negotiation. It allows to him raise tariffs and deploy other remedies in case a trading partner were to deploy retaliatory measures.

At the same time, it gives him the power to reduce tariffs or limit the scope of duties imposed if the country aligns itself to the US on economic and security matters. Israel, which too has got hit with 17 per cent tariffs despite being among the first to officially cut duties for the US, falls in this category and is likely to benefit from this clause.

As for India, a trade deal will open the doors for Trump to make that exception, counting on the overall strategic convergence between both countries across a range of national security issues including critical and sensitive technologies. More importantly, it’s not also in US interests to allow tariffs to impact cooperation in other areas like defence, space and nuclear sectors.

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On the other hand, the jolt on China is the worst. With reciprocal tariff of 34 per cent, the cumulative impact on China can go up to 79 per cent duties on some items when added to tariff measures taken in the past.

In fact, Trump signed a second order on