The Indo USA tariff conflict will reshape the global order

By Colonel Awadhesh Kumar, Retd

Unable to bring down the “China Wall “ by his trade tariffs and similarly unable to make any viable dents on the Russian economy through his senseless unilateral sanctions, Trump was visibly frustrated.

However once the American tariff bluff worked on most of the 185 countries including its allies the G7 Countries and the European Union, Trump’s schizophrenia was demonstrated by his raising of tariff on Indian goods initially to 25% and then to 50% and may be eventually upto 100%.

The above along with India’s reciprocal measures will surely lead to sinking of the US-Indian trade by 30% to 50%. In 2024, the trade turnover amounted to approx INR 1100000 Crore or 110 kharab ( US$129 billion) but this is likely to come down to approx INR 77 kharab (USD 90 billion)

The American administration making use of a Don Quixote like President has deliberately taken on India and not by chance. They think that as a geopolitical competitor of China, if India buckles down then the United States will be able to appease China and reach an agreement with it on the trade issue. Both these results will further isolate Russia and then the USA will be in position to dictate to Russia.

Also the ongoing negotiations between the two on a trade agreement can be made to bring more beneficial results for the United States, through the threat of secondary duties.

However, contrary to the American thinking, the conflict heaped by America on India will now be firmly decided by India and the USA will be paying a very heavy price for these misadventures. These duties will cause serious damage, to the economy of the States itself as US inflation has already jumped 1.5 times due to the new trade war.

Trump has already conceded a goal without even realizing when Shri Piyush Goyal’s team just ignored the cut off date, as laid down by Shri Trumpji for completing the FTA negotiations.

New Delhi is already taking all necessary measures to protect its national interests and economic security. India will never abandon Russia, a close trusted and time tested friend. It will further strengthen BRICS and SCO and both India and China will trade peacefully as they have been doing since time immemorial. By ironing out their mutual differences they will be shaping the World Order in the foreseeable future.

The American leaders have accused India of buying large volumes of our crude oil and then selling oil products on the open market after refining. Trump while lying forgot that after the outbreak of the Ukraine conflict, the United States itself had encouraged India to import Russian oil in order to strengthen stability in global energy markets. The United States itself continued to import depleted uranium hexafluoride from Russia for its nuclear industry, palladium for the electric vehicle industry, fertilizers, and chemicals.

As reported, Trump has agreed to reduce tariffs from 30% to 15%, for the EU and in return, the EU promised to abandon Russian oil and gas supplies and annually purchase $250 billion worth of energy from the United States during the remaining three years of this American president’s rule. In addition, to appease Xi Jinping, duties against China have been reduced from 145% to 30%. A “trade truce” is currently in effect between the parties for 90 days, and it is scheduled to end on August 12. However Xi is unlikely to oblige.

In 1971, the USA GDP in USD terms was 1,185.9 billion whereas Indian GDP was just 6 % of it or approximately $67.35 billion. In the PPP ( Purchasing Power Parity ) terms the USA GDP was roughly estimated to be around International $1.7 trillion, where as India’s was International $ 267 billion or 15% of the US economy. That year USA gave a NIXON SHOCK to the world by ending the convertibility of the dollar into gold which indirectly impacted India’s foreign exchange reserves and trade.

In spite of this economic disparity, Shrimati Indira Gandhi stood up to that melanchonic bully Nixon and despite the threat of intervention by a nuclear armed flotilla led by USS Enterprise, carved out a new country Bangladesh out of erstwhile Pakistan.

In 1998, India’s GDP in USD terms was approximately $399.79 billion or just 4.7% of USA GDP of $8.578 trillion. However in PPP terms Indian GDP was International dollars 2.2 trillion or 24.3% of US GDP of International dollars 9.068 trillion.

India was now the 10th largest economy in the world based on PPP. No wonder all the sanctions imposed on India by that playboy Cilton for testing its nuclear arsenal could do nothing to deter Shri Atal Bihari firmly declaring India as a military nuclear power. Bill ji had finally come down from his high horse to re-establish full trade with India.

In 2025, India’s GDP is projected to be $4.19 trillion USD, and is expected to grow by 6.4% as per the International Monetary Fund (IMF). The USA GDP in 2025 is projected to be around $ 28.98 trillion and grow by mere 1.6% … a real DEAD ECONOMY as per Trump Ji.

The GDP of India based on PPP is projected to be International dollars 17.65 trillion in 2025 or 57. 8 % of the projected GDP of International dollars 30.51 trillion. So why should PM Narendra Modi worry about any antics of anyone.

Except Trump and his team, the rest of the World is sure that India will not abandon Russia or its oil. Therefore, the forecast for the cost of Brent at the end of August remains at the level of $67-72 per barrel.

Russia will also gain by buying products at reduced prices from various India and other countries since the
American market will be closed for them.

So at least 40% of all Indian goods going till now to American markets will now be lapped up by Russia. A part of this will be as a payment for S500, Sukhoi 57s and other defence items.

The trade turnover between Russia and India in 2024 amounted to a record $70.6 billion. At the same time, Moscow imported only $4.8 billion worth of goods, and exported $67.2 billion. For negotiating with the Russians, Shri Ajit Doval, the Indian NSA is already in Russia.

His visit is aimed at strengthening defense and energy ties with Russia, but its importance has become particularly significant after Trump’s statements. Both India and Russia are now committed to strengthening cooperation in the spirit of a particularly privileged strategic partnership.Even Putin is planning a visit to New Delhi.

India has already signed a FTA with the UK which will cater for another 20% of the goods presently going to USA. PM Modi is visiting China this month which is going to absorb around 30 % of goods presently going to USA. The balance will be going to EU countries and the Middle East.

And where will Trump be diverting all the exports, USA has been making to India. The USA defence companies are already worried about cancellations of Indian orders. So must be a host of many prominent American companies who have established a significant presence in India, leveraging the country’s large consumer market and skilled workforce.

These include well-known names in technology, consumer goods, pharmaceuticals, and other sectors. Examples of American Companies in India: IBM, Dell, Microsoft, Google, Amazon, Salesforce, Accenture, Colgate Palmolive, Procter & Gamble, Mondelez International, Gillette, McDonald’s, Pizza Hut, KFC, Subway, Starbucks, Coca Cola, Maybe line New York etc.

In case things don’t cool down, many of these companies may have to close down their operations in India. Also the time has come to enforce the Digital Tax laws passed sometime back on these American companies.

New Delhi is fully aware of the importance of economic and political relations with both the United States and Russia but has also demonstrated that it makes independent decisions. India as a great Asian power and emerging World Power will continue to make decisions in accordance with its national interests and with its actions is now going to reshape the World Order.

Good luck Trump.