Trump ups tariffs on India to 50 percent for buying Russian oil.
Do As I Say or Get Punished
Bloomberg reports Trump Doubles India Tariff to 50% to Punish Russian Oil Buying
Key Takeaways
- US President Donald Trump imposed an additional 25% tariff on Indian goods over its purchases of Russian energy.
- Trump’s move came after talks between Washington and Moscow over the war in Ukraine failed to yield an immediate breakthrough, with Indian Prime Minister Narendra Modi saying his nation is being unreasonably targeted by the US.
- A spokesperson for India’s Ministry of External Affairs called Trump’s announcement “unfair, unjustified and unreasonable” and vowed the government “will take all actions necessary to protect its national interests.”
Trump signed an executive order setting the new rate, the White House said Wednesday, which will stack on top of a 25% levy on Indian imports Trump announced last week. The higher duty will take effect within 21 days, according to the order.
“They’re fueling the war machine. And if they’re going to do that, then I’m not going to be happy,” Trump said Tuesday in a CNBC interview.
A spokesperson for India’s Ministry of External Affairs on Wednesday called Trump’s announcement “unfair, unjustified and unreasonable” and vowed the government “will take all actions necessary to protect its national interests.”
Levies on imports from dozens of US trading partners are set to increase starting Thursday, including those from India, which will face the prior 25% charge. They’re the centerpiece of Trump’s effort to shrink trade deficits, revive domestic manufacturing and collect revenue for the federal government. The tariffs also carry risks for the global economy, including the prospect of higher costs and broken supply chains.
Trump’s tariff threats have crashed headlong into the US’s longstanding objective of cultivating India, the world’s most populous nation, as a geopolitical counterweight to China. It’s a turnabout from Trump’s first term, when he shared a warm relationship with Modi.
The US president has ramped up attacks against India in recent days, calling its economy “dead,” its tariff barriers “obnoxious” and its people indifferent to the plight of Ukrainians. Indian officials have also bristled at how Trump has characterized his role in helping to resolve the India-Pakistan conflict earlier this year.
Ahead of the talks, Trump suggested he would impose increased levies on other countries, including China, that like India buy energy from Russia.
“We’ll be doing quite a bit of that,” Trump told reporters. “We’ll see what happens over the next fairly short period of time.”
Question of the Day
Dear Mr. President, is it OK if I pee?
China won’t put up with this s* so we will see about Trump’s threat on China.
If Trump follows through, look for China to block rare earth exports in about one second flat.
Imagine the Howls
Imagine the howls had Biden done the same to India. Mercy.
If Trump wants to deal with Russia, might I suggest doing so directly instead of forcing the world to do his work for him?
At a tariff rate of 50 percent, we are close to the point most trade with India will shut down.
India’s Deficit
The lead chart shows a trade deficit acceleration with India starting in 2020.
The same thing happened with Vietnam, Taiwan, and Mexico as the trade deficit with China allegedly stabilized.
US Balance of Trade Select Countries
Tariff avoidance by China is in play. It is uncertain what role India plays.
Trade With India by Sector
The above chart is a bit stale but instructive. The overall numbers match my lead chart.
Much trade is back-and-forth goods processing, for example, stone, glass, and metals.
However, textiles, footwear, and headgear aren’t. Those categories provide much headroom for tariff avoidance from China.
The US has a legitimate gripe with India on agricultural goods. But some of that is due to religious reasons.
In contrast, oils, minerals, lime and cement are primarily US exports. I am sure India can easily get those elsewhere. Hello China.
The US Trade Deficit with China is Understated by as Much as 30 Percent
On January 18, I noted The US Trade Deficit with China is Understated by as Much as 30 Percent
Normal trade math does not add up. US imports and China exports are not in sync.
It’s highly likely that India is involved in China’s tariff avoidance.
What About Services?
The Economic Times reports US enjoys $35-40 bn surplus with India if services, arms, royalties included.
The US, despite reporting a USD 44.4 billion trade deficit with India, runs a USD 35-40 billion overall surplus when revenues from education, digital services, financial activities, royalties, and arms trade are factored in, economic think tank GTRI said on Monday. It said for India, this means it has every reason to walk into free trade agreement negotiations with confidence, pushing back hard against inflated deficit claims and demanding fair, balanced terms that reflect the full economic relationship, not just a narrow, cherry-picked slice of the ledger.
“But this trade deficit narrative is misleading and incomplete,” GTRI Founder Ajay Srivastava said, adding that according to the think tank, the US quietly rakes in USD 80-85 billion every year from India through education, digital services, financial operations, intellectual property royalties, and arms sales.
“These massive earnings do not show up in the narrow goods trade statistics. When you factor them in, the US isn’t running a deficit with India at all – it’s sitting on a USD 35-40 billion surplus,” he said.
In contrast, the US claims a mere services surplus of around $102 million.
If we assume the answer is somewhere in the middle, The US has a mostly balanced trade relationship with India.
If Trump can crack get India to crack down on tariff avoidance by China and properly factors in services, Trump has no gripe with India other than agricultural which India won’t fix on religious grounds.
But Trump does not care about services (only goods). Nor does he care about the Sacred Cow or any other religious issues.
To put it succinctly, Trump does not care about anything other than his idiotic definition of reciprocal tariffs and getting the world to bow down to his every wish.
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