Exclusive | Trump’s tough talk on India is more of a tactic than true trade war: Lord Jim O’Neill

New Delhi: US President Donald Trump announced on Friday that his administration will soon match the tariffs India and China impose on American goods. His push for “reciprocal tariffs” could shake up global trade affairs, as India’s steel exports to the US face an 85% snare. Meanwhile, the rupee has sunk to a record low, and India’s long-stalled FTA with the UK remains stuck in limbo.

As Trump continues to take jabs at India, Hindustan Times spoke with Lord Jim O’Neill—the economist who coined the term “BRIC” (Brazil, Russia, India, and China), led Goldman Sachs in his prime, and shaped Treasury policy in the Second David Cameron Ministry—to weigh in on Trump’s trade war, India’s economic trajectory, and the roadblocks to the UK-India FTA deal.

Edited excerpts:

Q. With Trump’s tariffs threatening to slash India’s steel exports to the US by 85%, how can India counteract this economic hit while maintaining a balanced trade relationship with Washington?

“See, dealing with Trump is tricky. But having dealt with him during his first term, Modi likely has a strategy to negotiate exemptions or compensation—perhaps offering special access to India’s infrastructure projects, which Trump tends to appreciate, or leveraging India’s tech expertise for joint ventures.

“Trump has shown he can be swayed—his initial tariff threats on Canada and Mexico over fentanyl and immigration disappeared within 24 hours after they proposed alternatives. That seems to be the best approach. But whether it will work in the long run? That’s hard to say. Even Trump himself might not know.”

Q. But Trump has called India a ‘very big abuser’ in trade—do you think this rhetoric undermines the possibility of constructive negotiations, or is it simply a tactic to pressure India into making concessions?

“I believe it’s the latter. Trump has been openly aggressive toward almost every country in the past four weeks, but I don’t think he truly means it. It seems more like a tactic to pressure others into making concessions.”

Q. The rupee has hit an all-time low against the dollar, making it Asia’s worst-performing currency. How can India address this decline, and do you think the Reserve Bank of India’s rate cuts are contributing to the currency’s underperformance?

“I don’t closely follow the rupee’s daily movements, but in 2024, there was a global surge in optimism about India’s economic future. It became almost fashionable to see India as the next big opportunity. When I visited for a conference, I was curious to see if this enthusiasm was justified, and while I think India has made progress, there’s still a lot it needs to improve.

“So, when US interest rate expectations shifted, triggering a bond market sell-off and a stronger dollar, it wasn’t surprising that Indian stocks corrected sharply and the rupee weakened. Market sentiment was bound to change, and this was proof of that.

“I wouldn’t worry too much about the rupee’s dip. Currencies fluctuate—that’s their nature. What matters is keeping inflation in check and ensuring financial stability. If India manages that, the rupee will recover, especially as the dollar has already started weakening against other currencies. In the end, currency movements often have more to do with the US and the Fed (Federal Reserve) than domestic policies.”

Q. What about the India-UK FTA? The negotiations have faced significant delays. Do you see these delays as a sign of deeper challenges in finding common ground, or are they simply procedural hurdles tied to political transitions?

“I think it’s a mix of all these factors. Negotiating trade deals for major economies has become even tougher with Trump in the picture, especially with uncertainty over tariffs and how the US might react to a UK-India agreement that doesn’t align with its own trade plans. That’s a challenge that can’t be addressed until we see where the US stands with both countries.

“Beyond that, there are still some unresolved issues between the UK and India. But having attended a UK-India forum recently, I can say there’s meaningful progress in discussions. I’m hopeful they can agree on something substantial, though it’s crucial to get the details right. Politicians often chase headline-grabbing deals, but what really matters is ensuring the agreement is solid and well thought out.”

Q. What specific provisions or sectors should India and the UK prioritise to ensure the FTA delivers tangible benefits for both economies?

“Recently, at an event, in India, I chaired a session on cooperation in pharmaceuticals and health research—an area with huge potential for collaboration. The UK’s top universities, consistently ranking among the world’s best, play a key role in cutting-edge health research, early-stage drug development, and vaccine innovation. The Covid-19 partnership between the UK and India’s major producers showed what’s possible, and there’s scope for more, whether in antimicrobial resistance or vaccine research and development.

“The same applies to alternative energy—India’s green tech needs are massive, and the UK has promising developments, like small modular reactors. Another key issue is easing visa restrictions for Indian students in the UK, which still needs a fair solution. There’s a lot of exciting potential, but the focus should be on building a solid, well-thought-out partnership rather than rushing into a deal just for the sake of it.”