How should India respond to Trump tariffs? Cite Alaska outcome to US, join RCEP: Sachs tells Firstpost

American economist Professor Jeffrey D Sachs said that after the
Alaska summit between US President Donald Trump and his Russian counterpart Vladimir Putin, India should reach out to Washington, DC, seeking to “immediately” cancel the 25 per cent “penalty” tariffs, and start looking for alternative markets like the Regional Comprehensive Economic Partnership (RCEP).

The ties between the United States and India took a major blow after Trump announced an additional 25 per cent “
penalty tariffs” on Indian goods, bringing the total to 50 per cent. Trump argued that the duties are being imposed because India purchases Russian oil amid the war in Ukraine.

Soon after the announcement, Indian authorities pointed out that China purchases more oil from Russia than India, but Beijing is facing no such ‘penalty tariffs’. What surprised New Delhi was the fact that European nations and even the United States engage in trade with Russia, but only India was singled out. Not only this, after the Alaska summit with Putin, Trump’s threat to impose “heavy tariffs” on Russia also disappeared into thin air.

In an email interview with Firstpost’s Bhagyasree Sengupta, Professor Sachs, a noted economics professor, bestselling author and one of the biggest advocates for sustainable development, shared his take on the latest Trump tariffs on India and how New Delhi should navigate the situation. Excerpts:

Q Are you surprised by the way Trump has reacted on the trade front with India?

Prof Sachs: I am shocked by the ineptitude of the Trump team. I always told my friends in India not to count on the US, as the US is out for itself and is not trustworthy. Still, the brazenness of the Trump administration’s actions surprised me.

Q The issue does not seem to be about Russian oil alone, or just the trade deficit. Why do you think India-US relations seem to be going downhill under Trump?

Prof Sachs: Trump does not think ahead. He and his team are impetuous. There is no long-term strategy. Nonetheless, I warned Indian officials not to believe that the US market would be wide open for India’s exports. I said that the US is becoming protectionist, and that this would apply to India as well.

Q India and the US have been building their relationship on many fronts – economy, defence, geopolitics – in the past couple of years. Do you think Trump’s recent moves against India will undo some of that?

Prof Sachs: Definitely. Trump’s actions have opened many eyes. The US is not a true ally of any country today. It acts unilaterally, and often against the interests of its closest neighbours (e.g. Canada and Mexico) and supposed long-term allies. India should be aware of two main things. First, the US will be unilateral in its actions. Second, the US will be protectionist. Third, India should not allow itself to be “used” against China, such as in the Quad, which is a very misguided initiative.

Q How do you think Trump’s tariffs will hurt America’s economy?

Prof Sachs: They will make the US economy less competitive, and they will make US assets less attractive. Thus, they will slow US growth and raise US interest rates.

Q. What role do you see for Brics during a tariff war with the US? What should be the grouping’s strategy?

Prof Sachs: The Brics should defend the WTO and maintain open trade amongst themselves. China and India should deepen their trade relations for mutual benefit, and should strive to solve other outstanding issues between them (notably the border issues).

Q Do you think Trump’s tariff move against India has something to do with Russia and the Ukraine war, or China?

Prof Sachs: The US is first and foremost targeting China, then Russia, and then India and Brazil. The US, especially the Trump Administration, does not like other major powers that do not pay obeisance to the US. That is why all the five original Brics are under attack by the US (including not only Brazil, Russia, India, and China, but also South Africa).

Q Do you think Trump’s modified reciprocal tariffs were his way of diverting attention from the Epstein scandal?

Prof. Sachs: No. He is using other means to divert attention from the Epstein scandal.

Q What do you think India’s strategy should be to navigate the Trump Tariffs?

Prof Sachs: In the aftermath of the Alaska Summit, India should request the US to cancel immediately and without further notice the 25% “penalty” tariff due to India’s purchase of Russian oil. On a strategic level, India should not rely on export growth to the US market. It might happen, but US protectionism might stop it. India should instead focus on other markets, including the Brics and RCEP (the Regional Comprehensive Economic Partnership, now including China, Japan, Korea, Asean-10, Australia, and New Zealand). India should indeed join RCEP, which would add dynamism to India’s economy and to the South and East Asian economies more generally.

Q While Trump had issues with India trading with Russia, why does he not maintain the same scrutiny for China, the EU and the US itself, which still trades with Russia?

Prof Sachs: Don’t look for fairness or consistency in imperial actions. Empires do as they please, without following principles. America is no exception.

Q India is one of the biggest oil importers in the world. If it does not meet its oil needs from Russia, it would buy from other players in the international market. This would eventually raise the global oil prices. This is why the Biden administration even praised India for keeping global oil prices stable. Why is there a change of policy in the Trump administration, whether the White House assessing this risk?

Prof Sachs: Trump tried to cajole or threaten Russia into an immediate ceasefire. That failed. Since then, he has agreed with President Putin to reach a peace settlement that addresses the underlying reasons for the Ukraine War. This is a better approach. In line with that, Trump should immediately rescind the 25% “penalty” tariff due to India’s purchase of Russian oil.

Q Does Trump’s tariff move against India have anything to do with New Delhi’s repeated denial of Trump’s claim of the US brokering a ceasefire deal with Pakistan?

Prof Sachs: I doubt it.

Q Do you expect other US allies to take similar measures against India?

Prof Sachs: No.

Q Are Trump tariffs pushing India closer to Russia and China, given Doval’s visit to Moscow and PM Modi’s upcoming visit to Beijing? How is this helping American foreign policy?

Prof Sachs: Yes, Trump’s tariffs and foreign policy more generally are helping to unite the Brics. This is good for the world, since the Brics stand for multilateralism rather than US unilateralism, which serves neither the US nor the rest of the world.