Trump’s 50pc India tariff a hidden US sanction
Bloomberg :
The United States has increased its tariff on certain Indian imports from 25percent to 50percent President Donald Trump has called this new measure a “secondary” tariff, a term that is not formally used in trade policy but is similar to what is known in sanctions law.
Secondary sanctions are penalties placed on third parties that are seen as supporting actions the sanctioning country opposes. For example, if a US bank, port, shipping company, or other business is prohibited from dealing with the Russian financial system, a secondary sanction could make it illegal for non-US entities to engage in similar transactions as well, reports Bloomberg.
India is affected because the tariff is linked to its purchases of Russian oil. The stated goal of the measure is to pressure Russia to end the war in Ukraine. If that goal is not achieved, it is uncertain what additional steps the US might take toward India, which is currently the largest buyer of Russian seaborne crude oil.
The idea of calling the tariff “secondary” is unusual, but the US also has more conventional tools for sanctions, such as the Specially Designated Nationals list managed by the Office of Foreign Assets Control in the Treasury Department.
State-owned Indian refiners are already pulling back from the Russian trade. If they start showing up on the SDN list, it would become difficult for others to do business with them. No amount of nationalistic bluster can mitigate the seriousness of that threat.
To lose access to the US currency or the Western-controlled banking system would be a far bigger setback than a 50percent tariff. Even large Indian tycoons will not want to needle Trump. Russian crude has been the biggest source of oil for Mukesh Ambani’s refinery this year.
His rival billionaire Gautam Adani doesn’t have any exposure to oil, but he has existing legal trouble with the US government. He also has a vast port network to protect, reports Bloomberg.
What’s the way out then? In an interview with Reuters, Brazilian President Luiz Inacio Lula da Silva, who’s also been handed penal tariffs of 50percent floated a trial balloon: a joint response by BRICS. Modi, who spoke on the phone with Lula for nearly an hour Thursday, is expected to head to China this month – for the first time in seven years.
Marshaling a unified front to challenge Trump’s overreach might make sense to Lula, but ratcheting up the confrontation with Washington should hold no appeal for Modi.