Trump Unleashes Weapons Of Economic Destruction As India Refuses To Budge

The current week marks a very nasty anniversary of the first and only time nuclear weapons were used as weapons of war. The US bombed Hiroshima on 6 August 1945 and Nagasaki, three days later.

Both the uranium bomb and the plutonium bomb, developed as part of the Manhattan Project, were field-tested successfully — that is for sure. Whether these deadly attacks were necessary to force Japan to surrender is a matter of debate.

The war in Europe was over, May 8 being Victory in Europe Day. The bombing of central Tokyo that killed 100,000 people and destroyed most of 41 sq km had broken Japan’s morale in March. There is reasonable evidence that Japan was desperately waiting for honourable terms for the emperor’s surrender to end the war.

These were granted after the US demonstrated that it, and it alone, possesses the deadliest of weapons in human history.

Nuclear weapons have since served to maintain mutual non-aggression by the world’s superpowers, each of which has enough weapons to destroy not only the enemy but the entire planet itself, several times over. Mutually assured destruction underpinned this mutual non-aggression, which sounded a whole lot better when dressed up in French couture as detente. If one power were to strike with nuclear weapons first, it would be attacked in return.

Land-based missiles kept in silos, long-range bomber planes like the ones that dropped the bombs on Hiroshima and Nagasaki, only, more advanced, stationed in different parts of the world, and nuclear-powered submarines that do not need to surface frequently and so can roam the world deep underwater beyond detection — these represent the nuclear triad ensuring assured retaliation and destruction, in case the enemy strikes first.

Diversion Tactics

But recently, Trump said he has repositioned two nuclear submarines in the face of what he described were nuclear threats made by former Russian president Dmitry Medvedev.

Some people believe this nuclear posturing was to take the public’s attention off Trump’s alleged proximity to financier and child sex trafficker Jeffrey Epstein, talk of which has grown louder since the Wall Street Journal carried a story about Trump’s gift of a bawdy drawing made to Epstein on his birthday.

US jobs data showed far fewer jobs being created since Trump’s Liberation Day in April. Taking into account the removal of 230,000 jobs from the data earlier reported for May and June, by revision of the data, job creation averaged 35,000 a month for May-July, the lowest rate since the pandemic.

Trump was so enraged by the data, especially the downward revision of the jobs data, that he sacked the head of the Bureau of Labour Statistics. Unemployment has inched up, and wage gains have stalled.

Weapons Of Economic Destruction

Trump has been unleashing his own weapons of economic destruction. He has announced cumulative tariffs of 50% on imports from India: 25% as ‘reciprocal’ tariffs and another 25% as a penalty for buying weapons and oil from Russia. He has not yet dared to impose penal duties on the other major buyers of Russian oil, China and Turkiye.

Even at 25%, the tariff on Indian goods is higher than the ones Trump has imposed on Japan, South Korea, the European Union and nations that compete with India in labour-intensive exports. The saving grace is that the Trump tariff tantrum has kept trade in services outside its ambit, probably because the US has a surplus in global services trade.

It is welcome that India has, so far, refused to knuckle under. India has cherished its strategic autonomy and nurtured the capability to defend it through diplomacy, non-alignment, multi-alignment and building up of internal strength, of the economic and military kind, ever since Independence.

Right now, Pakistan is wooing the US, and being wooed back, with Trump suggesting that the US would help Pakistan discover and develop its oil reserves, so that Pakistan might even be in a position to sell oil to India.

Pakistan’s army chief is reportedly visiting Washington DC yet again. Pakistan evidently feels it is well positioned to play the US and China off against each other to wrest concessions from both, much as India had obtained assistance from the US and the Soviet Union during the Cold War.

India Must Make New Friends

China refuses to settle its border dispute with India, choosing to keep it alive, even as it is willing to cooperate on several other fronts. India has the opportunity, and the responsibility, to work with China and other members of BRICS to salvage globalised growth and rules-based world trade.

Before the return of Trump to the White House, the US has been backing India to countervail China in the Indo-Pacific. The shift in US foreign policy makes it necessary for India to strengthen other ties, particularly with Japan, South Korea, Australia, Southeast Asia, and Africa, besides its already robust ties with Russia and West Asia, to cooperate with China as an equal partner in countering US bullying on trade.

BRICS should go ahead with its plans to create a Reinsurance arm and a clearing house for cross-border transactions in securities. It must further move ahead on plans to create an alternative to the US dollar as a medium for international transactions that do not involve the US as a counterparty.

RBI’s Math Not Mathing

The US Fed kept policy rates unchanged, despite heavy pressure from the US president to lower rates. India’s central bank also decided to hold policy rates unchanged. Both were appropriate decisions. However, the RBI’s governor’s patriotic urge to defend the Indian economy against the US president’s charge that it was ‘dead’ proved stronger than his level of numeracy. The Indian economy contributes more to world growth than the US does, he said.

The IMF forecasts US growth to be 1.9% in 2025. Its $28 trillion odd economy would add $541 billion to global output. Even if India does grow at 6.5%, its addition to world output, given its current size of $3.9 trillion, would be a shade under $260 billion. For India to contribute more to global growth than the US, it would have to grow at least at 13.3%.

Every RBI governor cannot be a world-class economist like Raghuram Rajan. But we do expect our central bankers to get four when they add two and two.