Exorbitant privilege, Trump style

Business Recorder

9 hours ago

Last week it was Putin. This week it's all of Europe. Ever since Donald Trump's sit-down with the Russian president in Alaska, that icy stage for the grandmaster spectacle, leaders across the Atlantic have been lining up at his door.
Suddenly the same capitals that questioned his authority to negotiate on their behalf are outdoing each other to pucker up and secure favour before the next big move.
And poor Zelenskyy, always a pawn in these games, must be wondering what happened. After all, it wasn't too long ago that Washington played him as the gambit on the European chessboard. He was hailed as a symbol of resistance, showered with weapons, promised unyielding support.
Now it's the same White House that's implicitly endorsing a Russian carve-up of Ukrainian territory. That's the trouble with proxy wars. When the players switch seats, the proxies lose their place on the board.
But while that game plays out in Europe, another one is unfolding closer to home. This time it is India in the hot seat. And here too, Trump is using the same tools of coercion and spectacle. Only the stick is different. Enter America's infamous exorbitant privilege. Just when talk of dedollarisation was gathering pace and headlines questioned the future of dollar dominance, that same privilege has come roaring back — not as incentive but as punishment. The unique status of the dollar as the global reserve currency is once again being wielded to bend policy, shape alignments, and punish disobedience.
According to Peter Navarro, the former trade adviser now back in Trump's inner circle, India's $43 billion trade surplus with the United States comes with strings attached. It's not enough for India to earn dollars. Washington now wants to decide how those dollars are spent. Buying cheap Russian crude and reselling refined petroleum to other regions, Navarro says, is deeply corrosive to the effort to isolate Putin's war economy. If India wants to be treated as a strategic partner, it must first act like one.
This is classic Trump. Strategic ambiguity masking tactical muscle. Publicly he frames it as partnership. Privately the pressure is applied. And if loyalty isn't guaranteed, outcome the tariffs. As things stand, $87bn worth of Indian exports are now under threat of a 50 percent duty from Aug 27. That's not a warning shot. That's a loaded gun on the trade table.
The real pressure point is India's dependence on dollar liquidity. How else will it pay for the $109bn it spends annually on imports from China? How else will it fund the next round of supply chain relocations, semiconductor capacity, or defence modernisation. That's the leverage Navarro is now spelling out in public. That's the same leverage Trump is wielding without hesitation.
To make matters worse for Modi, none of this is happening in isolation. If he thought the Russia relationship would give him oil independence, or that India's new manufacturing push would shield it from trade retaliation, this past week has been a rude awakening. Not only has Trump made it clear that India must follow Washington's rules, he's also forcing New Delhi into the awkward position of having to re-engage China on economic terms just to soften the blow.
It's not that Modi wants to pivot east. He can't. After Beijing's very public military and material support to Pakistan in the last India-Pakistan conflict, any meaningful strategic alignment is politically impossible. But economics does not care for loyalties. If India wants cheaper batteries, EV tech, or lithium-ion supply chains, it will have to look to the same Chinese companies it once barred. And when you're being squeezed from one side by dollar hegemony and from the other by voter expectations at home, the middle ground starts to shrink.
So while Europe repositions itself around a re-empowered Trump, and India scrambles to salvage dignity without sacrificing market access, the real lesson is this. Donald Trump isn't playing chess with individual nations. He's playing a global game of leverage. And the currency isn't just the dollar. It is control. And he loves it, because he knows he'll win by default.
Which brings us, almost inevitably, to Pakistan.
So far, it has escaped the wrath of Trump's transactional diplomacy. In fact, it has somehow ridden a wave of goodwill with the US president. He's had lunch with the army chief. He's publicly praised Pakistan's role in regional stability. He's even spoken positively about its cooperation on Afghanistan and anti-terror efforts. And while no one's quite sure what has charmed him — was it the quiet capture of an ISIS commander in Afghanistan, the lobbying for a Nobel nomination during his last term? — the approval is real, at least for now.
But this is Trump. The same Trump who once turned on Islamabad with a single tweet. He declared 'no more' in 2018 and froze aid while accusing Pakistan of lies and deceit. The same Trump who can pivot from handshake to sanctions faster than his advisers can draft the next memo.
Pakistan may have his attention, even his praise. But in this particular game, attention isn't a guarantee. It is a spotlight. And nobody stays in that spotlight for long without eventually being told where to stand, what to say, sometimes even how to spend.
Copyright Business Recorder, 2025