This is no time to shut off your laptop and take a nap. Developments are happening at breakneck speed, and all of it could affect us in India, and not at some ‘strategic’ level, but right down on the ground. Much of this is being driven very publicly by US President Donald Trump, with ‘deadlines’ being imposed and reimposed every other day, and the threat of tariffs being used to an unimaginable extent. The threat of inflation is growing, as new tariffs targeting India spark anger and loud debates in the media.
The Threat
Here are the main facts as regards India. First are those tariffs which are purely trade-related and pegged at 25 per cent. Analytical examination of the end effect of those tariffs seemed to indicate that India’s total global merchandise exports would be affected by just 1.87 per cent, and the impact on the country’s GDP will be minimal at 0.19 per cent. As US officials are due to arrive in Delhi on the 27th of this month, this was clearly a bargaining position, particularly for entry into the agricultural market, a highly protected area of the Indian economy given its history.
India was once import-dependent on the US, with the infamous PL-480 plan, which used surplus US food production to manoeuvre and affect foreign policy. This continues as late as 1973-74 with India buying American wheat in thousands of tonnes. From there to self-sufficiency is clearly not a journey anyone will roll back. Besides, with about 146 million farmers—not counting 12.5 million landless farmers—this is politically sensitive. Another problem is that the number of farmers has been decreasing, a trend likely to increase as climate change hits crops.
Last year, for instance, India had to import wheat to overcome serious crop damage due to extreme heat. Data indicates that horticulture and fisheries were key drivers of economic growth, not agriculture. Prime Minister Narendra Modi emphasised rather unusually that India would never compromise on the interests of farmers, fisheries and dairy, and that he was prepared to pay a heavy personal price for this. That indicates no give on agriculture, even while recognising this as an attack against himself. That needs some thought, especially after the initial bonhomie between the two leaders. Also, the US knows full well that farmers’ protests are the Achilles’ Heel of any government in India. There’s more here than meets the (immediate) eye.
Oil and the Ukraine Crisis
Then came the second tranche of an additional 25 per cent tariff due to oil trade with Russia. This has long been a grouse with Trump, though the oil trade and India’s refining had stabilised oil prices worldwide and helped European economies withstand an oil shock. The sheer hypocrisy aside, there is a caveat. Remember that this began with a 500 per cent threat from Senator Lindsey Graham, brought down to a 100 per cent threat, and then the final figure.
The imposition of this additional tariff was on August 6, a day before India’s National Security Advisor Ajit Doval was due to arrive in Russia for talks with Russian President Vladimir Putin. Again, this seems to be a negotiating thrust, and it could well be that this worked, even as China unexpectedly weighed in the next day, with President Xi Jinping very unusually quoted as saying he is “glad” that the US and Russia were maintaining contact. An unverified clip of Trump seems to indicate that India did have a role in ending the Ukraine conflict. If that is so, then it’s big news.
Now it seems that Putin and Trump are to meet in Alaska, though the ‘deal’ is some months or more away. In all fairness, Trump has stood by Russia, saying early on that the North Atlantic Treaty Organisation should never have expanded to Russia’s borders. He has since promised that this expansion will not happen. But for Putin, the point is that this could change again with a new administration. He wants a permanent end to the threat from Ukraine and means to keep whatever territory he’s gained. But that’s all down the road.
A possible US-Russia deal may finally get Trump that Nobel Peace Prize he has coveted for so long. For India, it means access again to Russian weapons and possible co-production of fifth-generation aircraft and perhaps even the S-400s. But expect that President Trump will again use arm-twisting tactics to ensure that India buys US weaponry.
The Quad awaits, and it hinges on interoperability. Meanwhile, as Russia eventually restarts oil supplies to Europe, our own refineries may find their profits sinking. Again, however, US opposition to Europe buying cheap Russian oil (or gas) goes back decades. This year the US has replaced Russia as the largest source of imports of gas and petroleum. Moscow in 2020 accounted for nearly 30 per cent of crude, compared to 9 per cent from the US. In short, the more things change, the more they remain the same.
Finally, the question as to why Trump has targeted India only, and that too in abusive language, while giving a free pass to China, is one that puzzles most analysts. One point here is that ‘warnings’ of a rising India being no good for US policy have been put out by academia, including the Rand Corporation, for some years.
A second reality that will be recognised by policy analysts is that Washington has never been able to abide leaders who take an independent stance. The historically fraught relations with France are one example, with President Emmanuel Macron receiving his share of bullying. Consider that Putin, who is wise to this, never ever engages in public posturing vis-à-vis Trump. He just goes out and does what he wants.
It might be time for India to follow an old Chinese dictum. Hide your strength and bide your time. Wait for the right moment and then jump in. A little Buddhist serenity, even while muscling up, is the way ahead. Raging muscularity among TV talkers and a raucous Opposition will get you nowhere, fast.
