The threat of a global trade war is looming over the markets today, as world leaders continue over a crunch G20 summit in Japan. Both India and USA had different issues to discuss as Prime minister Narendra Modi and the US President Donald Trump met with each other on the sidelines of G20 Summit today in Osaka, Japan.

While PM Modi put a discussion on Iran with rising US-Iran tension as the top priority, there were no surprises from Trump’s side as he immediately said he would discuss trade. The US President had tweeted about the same just a day ago.

Trump is unhappy that India has imposed tariffs on 28 US products, including almonds and apples. The new duties, some as high as 70%, are a tit-for-tat retaliation for America’s refusal to exempt Delhi from higher taxes on steel and aluminium imports.

So, in a tweet blasted off en-route to the G20 meeting in Osaka, Trump announced he’ll have a stern word with Modi over the issue – demanding these tariffs are removed.

Trump set the tone for the G20, via Twitter, by demanding that India withdraw new tariffs on US goods — even though they were imposed in response to his own tariffs on India.

Although Trump proudly claims to be a “tariff man”, he doesn’t like it when other people play the same trick. Trump has also warned he could impose tariffs on all Chinese imports – an extra $325bn or so – if he isn’t satisfied with Beijing’s actions on trade.

Strategic part of India-US relationship not in sync with the trade part

Analysts in New Delhi said Trump’s statement was a pressure tactic. It also illustrated that the strategic part of the India-US relationship was not in sync with the trade part. While the strategic side showed convergence on issues such as terrorism and the need for closer defence interaction, the economic side of the relationship needed to be worked on.

Trump has an eye on a strong domestic constituency: In his election campaign, for instance, he said the US purchases more from other nations than it sells, which, he claimed, has stunted domestic manufacturing.

Earlier this month, India slapped tariffs on 28 US products exported to India, after Washington withdrew its long-standing trade concessions for India on 1 June.

Trump said the preferential status had allowed India to sell goods worth $5.6 billion duty-free. The US move was in line with Trump’s policy of reducing trade deficits, that is, equalizing the import and export between the US and other nations.

On the Iran situation, India on record said oil imports from Iran had been brought down despite the impact on the economy after the US sanctions against Tehran. India’s energy share import from Iran was 11 per cent.

Foreign secretary Vijay Gokhale said PM Modi outlined not just India’s energy concerns but also the need for peace and security in the region. Gokhale said Trump hoped oil prices would remain stable.

As for trade, the foreign secretary described the engagement as “productive” as both sides were able to “clear the air and set the agenda to resolve trade matters”. The two leaders have directed their officials to take the issue forward and an early meeting of trade ministers will be worked out to resolve outstanding issues.

Another issue of divergence with regard to 5G trials in India and US pressure to not include Chinese company Huawei was discussed as well though the specific name of Huawei was not mentioned by Gokhale in his statement.

He did point out how India made it clear that with a billion users and being the second-largest market for this technology, the country will determine where global trade goes on this count and thus, it is important for India and US to “collaborate”.

Markets maintaining close eyes on the G20 summit

Financial markets will be watching the G20 meeting closely, hoping for progress in the trade disputes that have slowed global growth in recent months.

Domestic equity benchmarks BSE Sensex and NSE Nifty started on a cautious note Friday amid weak cues from global equities as the G20 Summit began in Japan. The 30-share index was trading 39.58 points, or 0.10 per cent, lower at 39,546.83 at 0940 hours. Similarly, the broader NSE Nifty was quoting a mere 2.85 points, or 0.02 per cent, down at 11,838.70.

China has reportedly drawn up a list of conditions to present the US when Trump and Xi will dine on Saturday night. They include ending the blacklisting of Huawei. Trump is also due to meet Vladimir Putin and Recep Tayyip Erdoğan during a busy schedule. The meeting with Erdoğan is likely to be particularly fiery, given US concerns that Turkey is buying an anti-aircraft system from Russia.

Trump already had China and Vietnam in his spotlight. Yesterday, he declared that he was quite prepared to impose tariffs on all Chinese goods (currently more than $300bn has been spared so far).

He told Fox Business Network.

 “China’s economy is going down the tubes – they want to make a deal…“You have another $325bn that I haven’t taxed yet – it’s ripe for taxing, for putting tariffs on.”

Trump will also speak with Vladimir Putin – the first face-to-face meeting since the Mueller investigation into Russian interference in the 2016 election concluded. He’s also due to have a “working breakfast” Saturday with Saudi Crown Prince Mohammed bin Salman – where rising tensions with Iran will surely be discussed.