Won't be Trumped
Three weeks from now, India will be the most heavily tariffed seller in the US market besides Brazil. Yesterday, through an executive order, Trump imposed an additional ad valorem duty of 25% on India for 'directly or indirectly importing Russian Federation oil', taking the total to 50%. GOI probably saw this coming from the time Trump's tone changed from friendly to brusque a week ago. Where he had talked up the chances of a trade deal with India on July 8 – 'We are close to making a deal with India' – on July 30 he slapped a 25% import duty along with the threat of an unspecified penalty. Now, the suspense is over.
It's impossible to fathom Trump's logic. From the start, China was the presumed target of his tariff war. US runs its largest goods trade deficit with Beijing – worth $295bn in 2024. At one point, Trump raised tariffs on China to 145%, but China's retaliation with a rare earths supply freeze made him see reason. Now, China is tariffed at 30%. If Russian oil triggers Trump, China and Türkiye are also big buyers, yet they have not been 'penalised'.
It may be that Trump's acting in frustration. He had boasted he would end the Ukraine war within 24 hours of taking office, but six months have passed and Putin remains defiant. Perhaps, Trump believes stopping oil revenues will bring Putin to the table. And since he seems unable to touch China for now, India possibly seems like a softer target to him. But this is a huge mistake. For almost 80 years, India has refused to be cowed by hegemons. Yesterday, it termed Trump's action 'unfair, unjustified and unreasonable' and made it clear it will 'take all actions necessary to protect its national interests'.
As TOI has said before, the current discount on Russian oil is so little that India saves not more than $2bn a year. It could easily pivot to West Asian oil, but the resultant increase in crude prices would hurt all. Besides, if India chooses to pivot, it won't be on Trump's terms. While negotiations with US will continue, Indian exporters are under pressure, so deals with other countries must be prioritised. India should also look beyond goods exports – tourism, for instance – to increase forex earnings.
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This piece appeared as an editorial opinion in the print edition of The Times of India.
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