USA Tariff Tempest:
USA is the world’s most powerful economy. Its President has access to the finest economic research institutions, unlimited intelligence resources. It must have teams of brilliant analysts who can model complex trade scenarios down to the decimal point. Yet somehow, you end up pursuing a trade policy that achieves the exact opposite of what you intended, while your target country emerges stronger and more independent than before.
Russian President Vlaadimir Putin was in India last week. US President Trump reacted with frustration over India’s defiance of pressures to curb Russian oil and arms ties, linking it to Ukraine peace efforts amid his tariff threats. Envoys from the UK, France, and Germany published a joint op-ed criticizing Russia’s Ukraine stance days before, prompting India’s foreign ministry rebuke on unsolicited advice. The West views it as provocative but tempers responses to avoid alienating India, a key Indo-Pacific partnerWishful Thinking Trumping Analytics
Welcome to the story of America’s 50% tariff strategy against India. But India continues importing discounted Russian crude despite US penalties, prioritizing energy security and strategic autonomy. It ignored Washington’s demands to isolate Moscow.
Tariff decision is a masterclass in how institutional wishful thinking can override crystal-clear analytical evidence. Before we dive into the decision-making failures, let’s look at basic data. The basic economic facts were never hidden or classified. Data is in plain sight.
The Financial Data
India’s exports to the United States total about $79.4 billion annually. Sounds significant, right? But here’s what changes everything: that represents only 9.6% of India’s total exports of $825 billion. When you’re trying to pressure someone by threatening less than 10% of their total business, you’re essentially bringing a water pistol to a gunfight.
Even more revealing, India maintains a comfortable trade surplus with America by exporting $79.4 billion while importing only $41.8 billion worth of American goods. This means India actually benefits more from the trade relationship than they lose from it. Basic economics suggests that in any negotiation, the party with less to lose has more flexibility.
India’s total economy now measures approximately $4 trillion. The affected trade represents less than 2% of their entire economic output. USA is trying to coerce a $4 trillion economy by threatening 2% of their business. That’s like trying to control your neighbor by threatening to cancel your newspaper subscription.
The Food Security
Any serious assessment of India’s strategic position would have immediately identified their food security advantages as a game-changing factor. Food costs in India run dramatically lower than American equivalents across every category. Bread costs seven times less. Eggs cost four to eight times less. A substantial street meal costs six to ten times less than equivalent American food. These aren’t minor differences. They represent fundamental structural advantages that create different strategic possibilities.
India has achieved something remarkably rare in the modern world. A genuine food independence through competitive markets rather than government subsidies. No single corporation controls their food supply. Individual farmers own their land. Street vendors compete with each other. Corporate farming entities must contract with independent farmers rather than consolidating land ownership.
This creates a completely different strategic foundation than what American policymakers understand. When your population can eat well on a fraction of what it costs in other major economies, external economic pressure becomes far less effective. You’re negotiating from a position of genuine abundance rather than managed scarcity.
The Currency Independence
Any competent strategic analysis would have identified India’s payment system transformation as a crucial factor undermining traditional financial pressure tactics. RuPay and UPI transactions now vastly outnumber Visa and MasterCard usage within India. This isn’t just a preference shift but it represents practical independence from dollar-denominated and American-controlled financial infrastructure.
When the vast majority of economic transactions in a country happen through systems that exist entirely outside American influence, threats based on financial exclusion lose their potency. Yet this transformation appears to have been invisible to American trade strategists focused on traditional leverage points.
Similarly, India’s position as the world’s second-largest exporter of processed petroleum products should have been a glaring signal about their energy independence strategy. India import crude oil but export refined products. It is essentially operating as a global manufacturing hub for energy while maintaining sourcing flexibility. This makes sanctions pressure on energy relationships far less effective than traditional analysis might suggest.
The Inequality Data
World Bank data shows India as the only major economy where wealth inequality is actively shrinking. it should have been a massive red flag for anyone attempting pressure tactics. Social cohesion and improving domestic conditions give governments enormous flexibility in international negotiations.
When your population is experiencing better relative economic conditions, you can prioritize long-term strategic advantages over short-term export revenue. A government managing growing inequality might be forced to chase any available economic opportunity, but a government overseeing improving equality can take much longer strategic views. This fundamental shift in India’s domestic social dynamics appears to have been completely overlooked by policymakers focused on traditional economic leverage points.
India’s economy grew at 8.2% in last quarter, after the tariffs came into effect. Economy seems to have shrugged off the the sanctions of USA.The Diamond Monopoly
India controls approximately 90% of global diamond processing. This fact reveals their broader strategy of dominating value-addition stages across multiple industries. This pattern repeats in food processing, pharmaceutical manufacturing, textile production, and petroleum refining. India has systematically positioned itself at the most economically valuable source of multiple supply chains. This provides resilience that pure commodity exporters or pure service economies lack.
When you control processing capabilities, you can adapt to changes in raw material sourcing or end market demand much more flexibly. Yet this strategic positioning appears to have been invisible to analysts still thinking in terms of traditional colonial economic relationships.
The Wishful Thinking
So how did sophisticated analytical institutions miss such obvious strategic realities?
The political imperative was clear from the start. Demonstrate strength against countries supporting Russia’s war effort. This created enormous institutional pressure to find a way to “punish” India, regardless of whether punishment was strategically feasible or economically sensible.
Once the political objective was established, the analytical machinery shifted from objective assessment to solution validation. Instead of asking “can we effectively pressure India,” the question became “how can we effectively pressure India.” That subtle shift transforms analysis from discovery to rationalization.
I wonder if AI was used in decision making. Contrary to perception, AI can induce dumb ideas.
The Projection Error
American policymakers understand economic leverage through the lens of financial interdependence because that’s how the American system operates. They assume other countries think about trade relationships as networks of financial obligation and market access dependence.
But India’s leadership operates from a fundamentally different strategic framework focused on productive self-sufficiency and competitive market advantages. When your basic needs are met through domestic production at globally competitive prices, you’re playing an entirely different strategic game.
The failure to recognize this represents a classic case of projection bias.
Success gets measured by policy implementation rather than policy outcomes. Reports get written to justify decisions rather than evaluate their effectiveness. Rather than acknowledging that their leverage assumptions were incorrect, institutions often conclude they simply need to apply more pressure.
The Colonial Mindset
The deeper problem appears to be analytical frameworks still based on colonial-era economic relationships. Traditional colonial economics assumed developing countries would provide raw materials and markets while advanced countries controlled processing, financing, and high-value manufacturing.
American trade policy continues operating on assumptions that developing countries should remain dependent on external markets and external processing capacity. But as stated above, India has systematically moved beyond this model into sophisticated economic independence across multiple sectors.
This creates fundamental analytical blind spots. Policymakers trying to apply pressure tactics designed for traditional colonial economic relationships find themselves dealing with a country that has achieved genuine strategic autonomy in essential sectors.
Conflict of Interest
Jake Sullivan claimed Trump “threw away” America’s partnership with India due to his family’s deals with the Pakistan Crypto Council via the World Liberty Financial platform, calling it a “huge strategic harm” that undermines US credibility with allies. He warned that Trump’s 50% tariffs on Indian goods risk pushing New Delhi closer to China, making the US brand appear “in the toilet” globally while Beijing looks more responsible.
It explains why the policy appears so disconnected from strategic analysis. Personal financial considerations focus on immediate transactional opportunities rather than long-term strategic positioning. If accurate, this would represent the ultimate triumph of wishful thinking by substituting personal interest calculations for national strategic assessment.
The tendency to conclude that India is simply being unreasonable or that more pressure is needed, creates a destructive cycle where analytical blindness generates policy failure, which generates more analytical blindness rather than corrective learning.
India’s response by essentially treating the tariffs as an opportunity to accelerate economic independence rather than a problem requiring accommodation, demonstrates how strategic clarity can turn apparent pressure into competitive advantage.
The real lesson isn’t about trade policy specifics. It’s about how large institutions can systematically ignore obvious realities when those realities conflict with predetermined objectives.
Long Term Implications
Understanding why this damage persists across generations requires examining how collective memory functions within societies. When nations experience what feels like betrayal, disrespect, or racial prejudice from other countries, those experiences become embedded in cultural narratives that get transmitted through families, educational systems, and political institutions.The true cost of this policy failure extends far beyond immediate trade statistics or diplomatic tensions. When relationships that required decades to build get destroyed through a combination of strategic miscalculation and racial rhetoric, the damage reverberates across generations. It fundamentally alters geopolitical possibilities for the foreseeable future.
USA consistently supported Pakistan militarily through four separate wars with India, providing weapons and intelligence that directly threatened Indian security. Overcoming that legacy required extraordinary effort from leaders on both sides to overcome mistrust.
The bridge-building process of the past three decades involved creating new shared experiences that could compete with negative historical memories. Economic partnerships, educational exchanges, technology cooperation, and diplomatic collaboration all contributed to constructing a different narrative about what the relationship could become.
Young Indians began developing positive associations with American culture, innovation, and democratic values that countered their parents’ and grandparents’ memories of American weapons being used against Indian soldiers.
The current generation of young Indians is experiencing their first major interactions with American foreign policy at precisely the moment when American officials are using colonial-era racial slurs and implementing policies that appear to ignore obvious economic realities. These become the formative experiences that will shape their understanding of American intentions and reliability for the next thirty to forty years.
Think about a young Indian professional who has been building positive associations with American technology companies, universities, or cultural institutions. Now they witness American trade officials using terms like “brahmin” as colonial slurs. They see their democratically elected leaders as “stupid” for protecting their country’s economic sovereignty. The past positive associations now must compete with direct experiences of contempt and racial prejudice.
Bureaucratic Culture
Both governments now carry institutional memories that will outlast current political leadership. American foreign policy establishments will remember India as “difficult” and “uncooperative” during this period, while Indian policy institutions will remember America as fundamentally unreliable when their interests diverge from American preferences.
These institutional memories become embedded in the bureaucratic culture of both governments. Career diplomats, trade officials, security professionals, and policy analysts who lived through this period of antagonism will carry their experiences into future roles where they influence recommendations and implementation strategies. The skepticism compounds across multiple government agencies and policy areas, creating systematic resistance to cooperation even when political leadership changes.
Future American administrations will inherit foreign policy bureaucracies that have learned to approach India with suspicion and frustration. Future Indian governments will inherit institutional frameworks that treat American partnership offers with deep skepticism based on lived experience of hostility.
The damage may not be reversible but it will persist for generations to come.