The Trump tariff quandary facing ‘Narendra Surrender’
SOME political invective really does hit home. While Lloyd Bentsen’s “senator, you’re no Jack Kennedy” putdown to rival Dan Quayle in the 1988 US vice-presidential race didn’t win the election for the Democrats, it remains celebrated nearly four decades later.
Indian opposition leader Rahul Gandhi’s more recent jibe that prime minister Narendra Modi should be renamed “Narendra Surrender” is hardly in the same league. But it seems to have landed a punch on its target.
Gandhi’s bellicose suggestion here was that Modi was too quick to cave in to US diplomatic pressure following its short-lived conflict with Pakistan earlier this year.
The gag may have renewed applicability in the light of Donald Trump’s proposal to slap a 50% tariff on US imports from the world’s fourth-largest economy later this month.
Half of that represents a punitive element for India’s temerity in sourcing around a third of its oil supplies from Russia, equivalent to 1.7m barrels per day.
As Lloyd’s List Intelligence data established, there were at least three tankers carrying Russian crude anchored outside Indian refineries as of last Friday. Several more had loaded but were idling pending instruction. Those vessels have since discharged their cargoes.
These transactions take place on a willing buyer/willing seller basis and are legal under the laws of both countries, both of which are sovereign states and bear no obligation to comply with Western price caps.
There are multiple ironies here. India has moved on from the stifling semi-socialist atmosphere of the so-called Licence Raj under Rahul Gandhi’s grandmother Indira Gandhi in the 1970s and now favours free trade, as evidenced by its recent deal with the UK.
Moreover, Modi and Trump operate in similar style, as right-leaning populists entirely happy to court nationalist and religious sentiment when it suits their purposes, even when that takes them to the borderlines of bigotry.
Trump notably gave Modi a warm welcome in the White House earlier this year, describing him as a “great friend”, with the two sides vowing to double bilateral trade to $500bn by 2030.
Rahul Gandhi is doubtless getting the popcorn in, in the expectation that Modi will capitulate to the pressure. The obvious parallel is EU president Ursula von der Leyen’s impromptu scurry to Trump’s Scottish golf course last month, where she signed up to 15% US tariffs on EU exports.
Brussels spin doctors have painted that as a win, given that the rate initially threatened was 30%. But the outcome of this lopsided agreement is highly detrimental for European exporters, not least manufacturers in von der Leyen’s native Germany.
Delhi is dilly-dallying on facing down Donald. The pointers are that in the absence of an official steer, state-owned refineries are holding back from spot purchases of Russian crude anyway.
The obvious question for tanker operators is what happens if hundreds of millions of barrels of the black stuff must soon find alternative destinations.
China, which also refuses to abide by Western sanctions, is the most obvious replacement. Thanks to its economic muscle, it has been able to fend off Trump’s spectacularly petulant 145% tariff ultimatum and bring that level down to a still frankly daft 30%.
But its appetite for additional crude imports will not be boundless, especially given that growth is faltering right now.
Another country sometimes mentioned is Türkiye, which imports around 6% of Russian crude output. But despite its recent neo-Ottoman drive for regional hegemony, Ankara doesn’t pack Beijing’s firepower, or anything even close. President Recep Tayyip Erdoğan is unlikely to court Trumpian wrath.
One alternative scenario canvassed by oil analysts is that Washington will get its way and prevent anyone anywhere buying Russian oil.
That would push the price up by $10-$20 per barrel, which would be bad news for the world economy. It would be even worse news for tanker tonne-miles, and would soften rates already noticeably down from their 2022 and 2023 peaks.
Meanwhile, as the first tariffs kicked in last week, Trump jubilantly proclaimed on Truth Social: “IT’S MIDNIGHT!!! BILLIONS OF DOLLARS IN TARIFFS ARE NOW FLOWING INTO THE UNITED STATES OF AMERICA!”.
As the reality-based community prefers to frame things, tariffs are paid by US importers. The billions of dollars are flowing from American companies to the American government and will ultimately be reflected in higher prices for American consumers.
Compare and contrast with the situation in 1962, when the US passed the Trade Expansion Act, authorising an 80% cut in tariffs.
“The best protection possible is a mutual lowering of tariff barriers among friendly nations so that all may benefit from a free flow of goods,” the president of time intoned as he signed the legislation off.
When it comes to trade policy, at least, one thing is entirely clear. Donald Trump really is no Jack Kennedy.
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