Content :

1. Trump’s Tariffs and a U.S.-India Trade Agreement
2. Urbanisation and the Challenge of Ideal Transit Solutions

Trump’s tariffs and a U.S.-India trade agreement

Context : Trump’s Tariffs implications

• Imposed sweeping tariffs (10%-135%) on over 100 countries, including uninhabited regions like Heard and McDonald Islands, highlighting their indiscriminate nature.
  • Justified as addressing a “national emergency” due to U.S. trade deficits, but ignored U.S. service exports, e.g., the U.S. has a $35B-$40B surplus with India when services are included.
  • Violated trade agreement tariff bindings, undermining predictability for businesses and global trade rules.

Relevance : GS 2 ( International Relations )

Practice Question : Discuss the implications of unilateral tariff measures such as those imposed by the U.S. under the Trump administration on India’s trade policy and strategic autonomy.(15 marks, 250 words)

Legal and Constitutional Challenges:

• Five U.S. small businesses (wines, plastics, bicycles, musical circuits, fishing equipment) challenged tariffs at the U.S. Court of International Trade (CIT) for harming their operations.
  • CIT ruled on May 28, 2025, that tariffs exceeded legal authority, criticizing the misuse of “national emergency” powers as unconstitutional.
  • Ruling stayed by an appeals court, leaving tariffs in place and highlighting unchecked executive power in the U.S.

Impact on U.S.-India Trade:

• U.S. increased tariffs on Indian steel (25% to 50%) and aluminum (10% to 50%), despite a 2023 “mutually agreed solution” to avoid escalation.
  • India withdrew its WTO dispute against U.S. tariffs but now faces new punitive measures, limiting retaliation options.
  • U.S.-China tariff truce and threats against Apple manufacturing in India reduce India’s strategic leverage in U.S.-China trade dynamics.

Proposed U.S.-India Trade Agreement:

• Negotiations aim for conclusion before a U.S.-imposed July 8 deadline, but face challenges due to U.S. tariff escalation.
  • India must secure removal of additional tariffs, protect against retaliatory measures on U.S. investments (e.g., Apple), and exempt Indian remittances from the proposed 3.5% tax under Trump’s One Big Beautiful Bill (OBBB).
  • Key Indian priorities: safeguarding digital services taxes, addressing H-1B visa restrictions, and ensuring smooth cross-border service trade, including data flow regulations.

Strategic Considerations for India:

• Align any agreement with WTO commitments to maintain multilateral trade safeguards, especially given U.S. disregard for WTO rules.
  • Avoid sub-optimal deals, as Trump’s tariffs face domestic legal challenges and may have a limited lifespan.
  • No guarantee of U.S. support in India-China military tensions, given Trump’s transactional approach.

Broader Implications:

• Trump’s tariffs and OBBB threaten separation of powers, risking further executive overreach in U.S. policy.
  • WTO rulings (e.g., by Switzerland, Norway, China, Türkiye) against U.S. tariffs reinforce their illegality, but enforcement remains weak.
  • India should strengthen multilateral institutions like the WTO to counter unilateral U.S. actions, as pledged during its G-20 presidency.

Conclusion: India must negotiate cautiously, prioritizing its economic and strategic interests while resisting pressure for a rushed, unfavorable deal. Domestic U.S. challenges to Trump’s tariffs may limit their longevity, supporting India’s option to hold firm.

Urbanisation and the challenge of ideal transit solutions

Urbanisation as a Growth Engine

• India’s path to becoming Viksit Bharat by 2047 hinges on urbanisation.
• By the 2060s, 60%+ of India’s population will migrate to urban areas seeking higher productivity.
• This urban shift places immense pressure on intra-city mobility and transit systems.

Relevance : GS 1 ( Urbanization),GS 2(Governance)

Practice Question : Urban mobility in India is at a crossroads between smart, sustainable planning and reactive expansion. Examine this statement in the context of current transport policies and their long-term viability.(15 marks, 250 words)

Challenges with Smart Cities vs. Tier-I Expansion

• While India aspires to build smart cities to reduce commute needs, progress is slow.
• In contrast, existing Tier-I cities are expanding rapidly, exacerbating congestion and urban transport stress.

Public Transport Push: Recent Measures

• Budget Initiatives:
  • PM e-Bus Sewa and PM e-Drive schemes aim to boost electric vehicle deployment:
    • 14,000 e-buses
    • 1,10,000 e-rickshaws, e-trucks, e-ambulances
• Gap remains wide: Only 35,000 urban buses are operational versus the required 2,00,000.
• Metro network expansion is being funded heavily but remains limited in reach and cost recovery.

Public Transport Access and Utilisation

• Only 37% of urban Indians have easy access to public transport (Economic Survey, 2024).
• Comparatively, China and Brazil offer over 50% access to urban mass transit.
• Metro systems in India are underperforming:
  • Actual ridership is often lower than projected.
  • Highly fare-sensitive users avoid metros when prices rise.
  • Last-mile connectivity gaps reduce metro usage effectiveness.

Subsidy Limitations

• India lacks the fiscal capacity to sustain large transport subsidies like in developed countries.
• Reliance on fare revenue makes it harder for metros to remain financially viable.

Rethinking Road-Based Transit

• Budget allocations for urban bus systems have increased to improve last-mile solutions.
• Private sector participation remains weak due to uncertain returns and high costs (especially for e-buses).
• India is investing in electric, CNG, hydrogen, biofuel buses, but lacks focus on alternatives like:
  • Trams
  • Trolleybuses

Cost-Benefit Insights: E-Buses vs. Trams

• Life Cycle Profitability:
  • Trams: 45% profit over 70 years
  • E-buses: 82% net loss due to high replacement & operational costs
  • Trolleybuses: Marginal loss, but better than e-buses
• Trams outperform in terms of sustainability, scalability, and financial return.

Future Outlook and Policy Considerations

• India must question whether it is chasing trend-driven tech (e-buses) or long-term, viable modes (trams).
• Planned tram revival in Kochi could be a turning point for sustainable transit.
• A return to trams is not nostalgia but a strategic move aligned with climate and fiscal goals.

Conclusion: Strategic Rethink Needed

• Urban planners must re-evaluate current investments and prioritise scalable, cost-effective solutions.
• A comprehensive P&L-based approach is needed for future transit policy.
• India must choose wisely today to avoid costly course corrections in the future urban mobility landscape.