Former USTR Official: Navarro Needs to Be Sidelined for US-India Deal to Be Reached

Linscott, speaking on the Washington International Trade Association's weekly podcast on Sept. 5, said that background trade negotiations between the U.S. and India haven't been getting attention because of Navarro's "unhinged" comments about the country. Linscott, currently a senior fellow at the Atlantic Council, said that remarks that "he's been making publicly about India" are "very offensive. I mean, really provocative. It's just remarkable." Outside his commentary on the situation, Linscott said that Navarro is not involved in negotiations with India: "He's not involved in any of these talks."

The situation will be resolved only through direct communication between President Donald Trump and Indian Prime Minister Narendra Modi, Linscott said: "This isn't going to be resolved even at Cabinet level." But because of what Linscott referred to as a "very emotional environment in the population of India," Modi will have to be presented with a deal that allows him to "save face," because of domestic political pressure.

Linscott said that due to the delicate nature of the negotiations, both sides will have to be creative, but he also said there is "a readiness among some on the U.S. side to be creative." He pointed to the nomination of Sergio Gore as ambassador to India as a positive sign because he "has the ear of the president." To find a "formula to allow both sides to win," he said, "Peter Navarro is going to have to eventually be sidelined for that to happen."

Wendy Cutler, vice president of the Asia Society Policy Institute and former acting deputy USTR, said that the pressure from the U.S. could push India closer into China's orbit, despite historic animosity between the two countries. She said that U.S. trade actions are pushing countries to do "things that just seemed off-limits before." Dan Mullaney, a senior fellow at the Atlantic Council and former assistant USTR for Europe and the Middle East, said that if foreign trading partners start working unilaterally as a result of U.S. tariffs, that "could have an effect potentially on the perceived U.S. leverage" in deal-making.

The U.S. already may have hit the "high point of its leverage," Linscott said, particularly with the potential removal of the International Emergency Economic Powers Act from Trump's tariff arsenal. While there are many other tools, IEEPA "has been shock and awe" for the Trump administration, and if it becomes unavailable, "it will have an impact on the leverage that has been exerted over these last few months," he said. In the "extreme scenario," that lack of leverage could cause announced deals to "not actually get fully executed" and fall apart, he said. If IEEPA justification for the tariffs goes away, the "mad scramble" to find other tariff avenues may cause countries to "slow walk doing the final legal text for a deal," while they see what form the tariffs take.

Mullaney said that all the deals need to be evaluated in the context of what others received, and that Japan's deal with the U.S. may cause the EU to have second thoughts about their own deal, because "one of the reasons this was a good deal" for the EU was that it was "better than all the other trading partners'." That is how the European Commission framed the deal to get it passed in the EU Parliament, and Japan's deal may have "undercut that rationale for the EU moving forward to implement their deal."

Linscott said that he was left "speechless" by the EU "explicitly saying it was eliminating tariffs" on all industrial goods from the U.S. He said that the Japanese deal was vague about industrial goods but that he cannot imagine "that it's any [more] onerous than what the EU has already agreed" to. "I mean, you can't do any more than zero on industrial goods tariffs," he said.

South Korea "must be very concerned" that it has been unable to finalize a deal with the U.S. as the EU and Japan seem to have finalized terms, Cutler said. They are used to having a competitive advantage against Japan and the EU with respect to auto exports because of their free trade agreement, she said, so she expects "a big effort by Korea now to try and finalize their deal" with the U.S. She said they "absolutely" need an equivalent deal to Japan on autos and that they believe they should get a 12.5% rate because of their FTA, but that "they're striking out in Washington with that argument."

Linscott said that of all the announced deals, "Vietnam got one of the worst ... or the worst" deal. "If there even is a deal," Cutler quipped. She also said that Switzerland needs to "just chill for a while" and to wait for the White House to "forget that they're angry at Switzerland," before they can move forward on a trade deal.

Joe Damond, the moderator of the discussion and the former deputy assistant USTR for Asia and Pacific, said that smaller countries like Switzerland and Vietnam are not the Trump administration's priority and that they may have to wait for resolution. He said that his understanding is that the administration "wants to wrap up these agreements by the end of the year" but that it will only be getting to the smaller countries "in the next couple of months."