By Anjan Roy
India will in all possibility face a new tariff from the United States of as high as 100% as Trump’s new policy to stop Russia’s Ukraine war. An economic tool, tariffs are now caught up in Donald Trump’s geo-economics.
Countries buying oil from Russia are now to be subjected to a 100% duty on all their exports to United States. Even if China could afford to defy this duty, India could ill-afford such tariffs and, also, incur America’s wrath.
A new bill to this effect is set on its passage in the US legislature for imposing secondary sanctions against Russia to deter the country from executing its war. The proposal provides for imposition of 100% tariff, rather selectively at two countries, India and China, which are the principal buyers of Russian oil.
The combined purchases of China and India, running into billions of dollars, have in a way bailed out Russia in its execution of war. Starved of the oil revenues, Russian war effort could collapse in no time. Russia is vulnerable to oil revenues for funding its efforts as its economy has otherwise shrunk.
With the war going on for over three years, Russia faces multiple problems. Direct military costs are estimated at around $300 billion, according to a report by CNN. Besides, Russian assets held outside the country running into billions, lie frozen with h western nations.
Many in the west have proposed to even start drawing down these frozen reserves to fund reconstruction of war ravaged Ukraine. These funds lie far out of reach of Russia. Sanctions on Russian banks have severely limited shadow transactions in Russian oils with other countries.
Besides, the heat casualties in the Ukraine war and demand for more troops on the grounds have depleted the manpower base for the Russian economy. The drawing of manpower for deployment has been so damaging that freed criminals from Russian jails have been inducted into the fighting force.
Later still, Russian is bringing in troops from abroad for fighting in Ukraine. North Koreans as well as others from diverse countries, including China, have been spotted and sometimes held in Ukraine.
The draft on fight age population have started telling on supply of workers in the Russian factories. This has been particularly deep in the war related manufacturing industries, thus in turn, crippling civilian industries.
Russia had banked on the United States moving away from Ukraine in its support and the sharp division between the NATO allies in Europe, on the one hand, and America on the other. However, the last round of NATO consultations have turned the tide of events.
America, frustrated with Russian president, Vladimir Putin’s intransigence, has turned full circles. President Trump had expressed his frustration with Putin and his double play. He has commented; “Putin speaks nice in the formal talks and then bombs everyone in the evening”. Trump had spoken to Putin directly several occasions and Putin had escalated his war and attacks immediately thereafter.
Seeing that diplomacy is not working, Trump is turning to arms twisting of Russia now. He is now resuming supplies of American arms through NATO allies and then following up with secondary economic sanctions which could hurt the Russian economy.
It will be on China now to back up Russia. In recent interactions with EU leaders, Chinese foreign minister had indicated that it could not witness Russia losing in Ukraine war. China has been playing its hidden hand of unqualified support for Russia. However, this would come to a test now that America and the west are unified over Ukraine support and could launch some crippling blows to Russia.
The present instance apart, America is using tariffs as a weapon of economic warfare ever since Trump entered his second presidency. On again, off again, Trump has been declaring against select countries ever since he got back to power.
Since Trump came back into the White House and have been playing his tariff threats, American economy is going through a turmoil. The markets are in a state of flux, with the volatility indices swinging wildly. Trump had to postpone his tariffs several times in the light of financial market swings.
India’s trade agreement with the USA had repeatedly been making progress and getting stalled. The Americans have asked for concessions in farm sector from India which is politically sensitive.
Thirty years back, it was impossible to even think of using tariffs and trade barriers. America was the home of free trade proponents and free economy fundamentalists. Milton Freedman, Harry Johnson had dominated the narrative.
Today, the narrative has reversed and Trump had changed the idiom. (IPA
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