Simplified version of today’s Hindu editorial
Cutting a trade deal with the U.S. can be deleterious—Like Canada, India must resist pressure to give in, just as Canada did
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The recent trade negotiations between the U.S. and Canada were acrimonious as both sides accused each other of adopting an uncompromising stand. The two neighbours have been deeply attached to each other in many fronts, especially in trade. From the 1965, automobile companies from both countries had been bound by a mutually beneficial agreement that allowed seamless two-way trade in automobiles and spare parts.
This happy relationship led to a bilateral free tase agreement in 1989. Later, this was expanded to bring in the NAFTA (North American Free Trade Agreement) five years later. The tase agreement flourished benefitting either side greatly. Canadian and the U.S. economy have a 1:10 ratio. To counter this dis disadvantage of having overly large trade partner, Canada successfully tried to set up huge manufacturing facilities for individual spare parts. The strategy was to achieve the ‘Economy of Scale’ advantage that lowers the cost of the finished product considerably.
In the crude oil refinery sector, Canada now refines 70% of the total oil requirement of American MidWest. This data has been revealed by the Nobel Prize winer Paul Krugman.In aluminium production too, Canada has emerged as the world’s leading producer. Some 60% of its production is exported. The U.S. is one of the big importers of Canadian Aluminium.
The house building companies of the U.S. almost entirely consume the lumber imported from Canada.
Despite such close and mutually beneficial trade arrangement, under President Trump, the bilateral relations have been heading south with increasing pace. In the recent aborted bilateral trade negotiations, Canada was blamed by the American negotiators of walking out just before the conclusion. Canada countered the allegation by stating that the U.S. negotiators attempted to insert some unacceptable clauses into the agreement in the last minutes.
To inflict a pain on Canada, President Trump lost no time to impose a tariff of 50% on most imports from Canada. Prime Minister Carney of Canada! Known for his deep insight into economic diplomacy, imposed a matching tariff on all imports from the U.S.
As a further punitive act, from September 29, entry of a few a Canadian products such as alcohol, diary products, and motorcycles will be totally stopped from entering the U.S. President Trump and Prime Minister Carney have publicly spoken about the failing trade agreement with no soft words.
Canada and its southern giant neighbour United States have been very close friends historically. In the fields of military cooperation, cultural exchanges, technology transfer and education, both countries have stood very close to one another. In foreign policy, both countries adopt almost identical postures.
Ignoring such harmonious relations, President Trump chose to put up a fence with his northern neighbour by adopting a hostile, uncompromising attitude in matters of bilateral trade. Their relations will now remain impaired for decades to come.
India must draw lessons from such a Trump-driven down-slide of bilateral relations. If Canada could be jettisoned so easily, India should be ready to face more heavy-handed approach from President Trump.Just as Canada chose to abandon a trade deal with the U.S., Malayasia had chosen to opt out of a trade deal with the U.S. in recent past. It’s now clear that the U.S. adopts a selfish and aggressive stance in its trade negotiations with other countries.
The U.S. had agreed to lower tariff on Indian exports to 18% in February,2026. Within months, Trump has discovered new reasons to punish India. Now, he cites grounds like forced labour and excess capacity to impose high tariffs on India and a few other countries. This position of Trump smacks of hostility and intolerance towards India . Prime Minister Modi has asked the country trade negotiators to go slow towards the finalisation of the bilateral trade agreement. Some delay will prove the emptiness of Trump’s newly discovered allegations of forced labour and excess capacity. India must, therefore, put its negotiations with the U.S. on low key.
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