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Trump Lowers (Tariff) Boom on Ally |
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Dear Reader, |
The president has trained his trade cannons on the subcontinental nation of India. |
He will impose an additional 25% tariff on Indian exports to the United States. |
That 25% penalty will go stacking upon the existing 25% tariff — for a combined 50% impost. |
That is because India, a nominal United States ally, purchases loads of Russian oil. |
President Trump believes Russian energy exports fund Mr. Putin's murderous adventures in Ukraine. |
The president is against the murdering. Thus he is out to throttle the Russian energy sales that keep the blood spilling. |
President Trump: |
They [Indians] don't care how many people in Ukraine are being killed by the Russian War Machine. Because of this, I will be substantially raising the Tariff paid by India to the USA. |
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India to Trump: Get Bent |
Yet India stands in stout defiance of the American. It pledges to continue taking in Russian energy. |
States a spokesman of the Indian government: |
We have already made clear our position on these issues, including the fact that our imports are based on market factors and done with the overall objective of ensuring the energy security of 1.4 billion people of India. |
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It is therefore extremely unfortunate that the US should choose to impose additional tariffs on India for actions that several other countries are also taking in their own national interest. We reiterate that these actions are unfair, unjustified and unreasonable. |
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India will take all actions necessary to protect its national interests. |
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The penalty is to enter effect 21 days after President Trump declares the penalty — a three-week negotiation space. |
I hazard the president anticipates negotiation. |
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India Faces a Higher Tariff Than China |
Should the penalty proceed as scheduled? India will then confront a greater tariff than the United States imposes upon China (30%). |
Yet China too purchases Russian energy in bulk — more even than India. China is also a prime adversary of the United States. |
India is not. |
Why then is the president using India worse than China? |
The answer is because China runs a corner on rare earth minerals, so-called. |
These are critical components of advanced electronics and other gadgetry. |
The United States requires them. And so it must extend China laxer trade terms — else China refuse their delivery. |
Yet should the president rap India so harshly upon the knuckles? |
I am far from convinced that he should. |
The U.S. Needs India to Counter China |
China is the great bugaboo of the United States… or so we are informed. |
India, meantime, is foe to China. The two harbor mutual dislike. |
Thus the United States and India share joint interests. |
The United States would have India represent a thorn in China's flesh, a distracting nuisance on its southwestern flank. |
Why then should the United States seize India by the scruff… and shove it around? |
Might India decide the United States is a poor ally — and cling closer to the gentler Russian bear — even possibly to China? |
One senior Indian official affirms that "India… is now exploring deeper engagement with Russia, China, and the BRICS bloc." |
The BRICS bloc incorporates both Russia and China, incidentally. |
Meantime, a certain Ajay Srivastava, a former Indian trade official, bellows that: |
US action will push India to reconsider its strategic alignment, deepening ties with Russia, China and many other countries. |
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Wait a Minute… |
I have yet another question for the president. |
Does he truly want India to cease purchasing Russian energy supplies? |
India boasts vast demand for petrochemical energy. Should India cease purchasing Russian energy, that vast demand would remain in effect. |
India would be compelled to collar its energy from alternate sources. |
Yet that demand would bid against a diminished supply — recall, Russian supplies would be under embargo. |
Equal demand against diminished simply equals greater prices. That is because the law of supply and demand is a law of economics. |
It is etched in granite. |
Where do greater oil prices lead? To inflation, that is where they lead. |
Let's Think About This |
Meantime, the president is hot for lower interest rates. |
Yet greater oil prices lead to greater inflation. And greater inflation nullifies the prospects of rate reductions — the Federal Reserve will not reduce interest rates while inflation menaces. |
Thus the president would heave a boomerang. |
Should he end Indian purchases of Russian energy… the boomerang would take its mid-flight pivot… and cony in on him through greater inflation… and interest rate steadiness… if not actual increase. |
A conundrum! |
'Measure twice, cut once,' runs an old expression. |
It is a plea for prudence, for caution. |
In this instance I fear the president may disregard the sage advice. |
I counsel repeated measurement — certain measurement. |
Only then should a man apply the blade. |
Brian Maher |
for Freedom Financial News |
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