A Western trade alliance against the world’s two most-populous nations is a silly idea. As a mechanism to discipline a third country, it is dangerous. China has gone past the point in its development where it could be threatened with sanctions without tanking the global economy. Those directed at India could be a huge strategic misstep.
The White House says it wants to smash Russian President Vladimir Putin’s war machine in Ukraine by imposing tariffs of as much as 100 percent on China and India, the two biggest buyers of Russian energy, provided its friends in the EU and the G7 come on board.
However, how can they? The EU might not have an internal consensus — a pro-Kremlin Hungarian leadership is likely to block any such secondary sanctions. Nor would Japan and the UK want to jeopardize their interests in Asia by making the US trade war their own.
For reasons that have nothing to do with the war in Ukraine, a joint front against China might resonate with some manufacturers in the eurozone. Over the past decade, Beijing has gone from being a trade partner of advanced nations to a rival that makes the same things as them. A tariff-induced rerouting of its US exports might mean a deluge of Chinese cars, office equipment, household appliances and furniture in Europe. Joining US President Donald Trump’s campaign could be a shield against price competition.
Any such protectionist measure would be anti-consumer. Given China’s control of critical raw materials such as rare earths, it would also be impractical. Beijing has effectively leveraged that chokehold, both between 2010 and 2015, and more recently in its spat with Washington. There is no reason why it would not do so again against a broader coalition.
The case for penalizing India is even more illogical. It is not a strategic rival to rich economies, and would not be for decades. Indian Prime Minister Narendra Modi’s government has just signed a free-trade agreement with the UK. A deal with Brussels is in the works. Japanese automakers such as Suzuki Motor Corp and Honda Motor Co have patiently invested in the country for years, and now financial institutions such as Sumitomo Mitsui Financial Group Inc and Mizuho Financial Group Inc are looking to expand, too.
Since it has none of China’s bargaining chips, Trump has found it easy to target India for buying discounted Russian oil. However, a threat of further punishment could backfire, especially if it is used as a tactic to prize open an agricultural economy that barely manages to balance the interests of farmers and the urban poor.
It does not look like Washington wants to push New Delhi into the outstretched arms of Beijing and Moscow. Even as Trump ratchets up the threat of higher tariffs — beyond the 50 percent already imposed — he is also confident of being able to conclude a trade deal.
That puts Modi, his “very good friend,” in a tight spot. Indian trade negotiators would still want a deal where they slash duties on most manufactured goods while accepting US tariffs of about 20 percent. That would protect export competitiveness at the same level as Southeast Asia. However, US demands do not stop at demanding an end to Indian refiners’ purchases of Russian oil. US Secretary of Commerce Howard Lutnick has also expressed his disappointment that 1.4 billion people do not buy a single bushel of US corn.
I have previously argued for New Delhi to permit imports of genetically modified US corn and soybeans, but only after allowing local farmers to also grow the high-yielding varieties. A timeline to eliminate tariff and non-tariff barriers in agriculture would have been a reasonable demand before Trump imposed his punitive duties. Now that he has played that card, Modi’s room to maneuver is severely limited.
India does not have a permanent, urban proletariat. Those working in textiles, footwear, gems and jewelry, and other labor-intensive industries facing the brunt of Trump’s sanctions come from villages. That is where they would return, just like they did during the COVID-19 pandemic.
It would not make much of a difference to them if Trump doubles the tariff. However, what would sting is if the government now capitulates on agriculture. Any such concession might be exploited by Modi’s political opponents as taking away the unemployed industrial workers’ last vestige of protection in their village hideout: the meagre income from the family’s smallholding, or at least a job as a farmhand. That could set off fresh protests against a prime minister who has been at the receiving end of farmers’ ire for much of his 11 years in power.
Modi has nothing to gain from joining a strategic Eurasian triangle in which manufactured products, technology and capital are overwhelmingly Chinese, while commodities are imported from Russia. The danger is that he, cornered by domestic political compulsions and unreasonable US demands, might make just that suboptimal choice.
That ought to make Western politicians wary of jumping on Trump’s bandwagon of retribution. A quarter of a century ago, they alienated their working-class voters by being too accommodating of China, when it joined the WTO. By blocking opportunities for the advancement of 375 million Indians, the world’s largest cohort of youth aged between 10 and 24 years, they might make the opposite mistake.
Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. Previously, he worked for Reuters, the Straits Times and Bloomberg News. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
On Sept. 3 in Tiananmen Square, the Chinese Communist Party (CCP) and the People’s Liberation Army (PLA) rolled out a parade of new weapons in PLA service that threaten Taiwan — some of that Taiwan is addressing with added and new military investments and some of which it cannot, having to rely on the initiative of allies like the United States. The CCP’s goal of replacing US leadership on the global stage was advanced by the military parade, but also by China hosting in Tianjin an August 31-Sept. 1 summit of the Shanghai Cooperation Organization (SCO), which since 2001 has specialized
In an article published by the Harvard Kennedy School, renowned historian of modern China Rana Mitter used a structured question-and-answer format to deepen the understanding of the relationship between Taiwan and China. Mitter highlights the differences between the repressive and authoritarian People’s Republic of China and the vibrant democracy that exists in Taiwan, saying that Taiwan and China “have had an interconnected relationship that has been both close and contentious at times.” However, his description of the history — before and after 1945 — contains significant flaws. First, he writes that “Taiwan was always broadly regarded by the imperial dynasties of
The Chinese Communist Party (CCP) will stop at nothing to weaken Taiwan’s sovereignty, going as far as to create complete falsehoods. That the People’s Republic of China (PRC) has never ruled Taiwan is an objective fact. To refute this, Beijing has tried to assert “jurisdiction” over Taiwan, pointing to its military exercises around the nation as “proof.” That is an outright lie: If the PRC had jurisdiction over Taiwan, it could simply have issued decrees. Instead, it needs to perform a show of force around the nation to demonstrate its fantasy. Its actions prove the exact opposite of its assertions. A
A large part of the discourse about Taiwan as a sovereign, independent nation has centered on conventions of international law and international agreements between outside powers — such as between the US, UK, Russia, the Republic of China (ROC) and Japan at the end of World War II, and between the US and the People’s Republic of China (PRC) since recognition of the PRC as the sole representative of China at the UN. Internationally, the narrative on the PRC and Taiwan has changed considerably since the days of the first term of former president Chen Shui-bian (陳水扁) of the Democratic
RSS