Trump tariffs are increasingly forcing countries to pick sides between the US and China
AdamSummary:
Trump’s escalating tariffs are pressuring nations to pick sides. India leans toward Russia and China despite U.S. penalties, while Mexico edges closer to Washington. Other allies like Japan, South Korea, and the EU navigate uneasy trade compromises.
President Trump’s trade wars are increasingly forcing countries to choose between the US and its main adversaries, China and Russia.
It’s a theme that has been evident for months but has been on heightened display this week, with headlines from India to Mexico underscoring that nations are not necessarily destined to choose the US.
On one side is India, which is now facing 50% US tariffs on an array of goods. Those duties are set to be felt in everything from textiles to solar panels in part due to the country’s continued purchases of Russian oil.
But a US pressure campaign to stop those purchases has, for now at least, clearly pushed India toward US adversaries.
Not only do India’s imports of Russian oil appear set to continue, they are even likely to rise in September, according to a Reuters report.
And Indian Prime Minister Narendra Modi is preparing for a high-profile visit to China later this week in what will be Modi's first visit to China in seven years.
On the other side of the spectrum this week is Mexico. America’s southern neighbor is eyeing new tariffs on China that could distance it from Asia.
It's a possible move that would deepen ties to the US ahead of high-stakes negotiations coming next year on renewing the United States-Mexico-Canada Agreement (USMCA).
Bloomberg News is reporting that the Mexican government plans to formally unveil these new China tariffs next month and could focus on imports such as cars, textiles, and plastics as part of a 2026 budget proposal.
Notably, the report added, the tariff increases may also target other Asian countries.
As Capital Economics added in an analysis, it's evidence of a top Trump priority in getting Mexico's help to keep China out of US supply chains. It's also evidence, the report added, of how America’s southern neighbor “appeared particularly susceptible to US pressure to put tariffs on China given its dependence on US final demand.”
But India appears headed in the opposite direction.
Syracuse University professor of Economics Devashish Mitra said this week that India’s ties with China could deepen in the months ahead — and perhaps even open the possibility that it joins a China-led Asian free trade agreement.
Mitra noted that with the “climate President Trump has created, it won’t be surprising if both India and China find this a mutually beneficial transaction."
On Fox Business earlier this week, Treasury Secretary Scott Bessent said that the Indian team began negotiations early and that he "thought India could be one of the earlier deals, [but] they kind of tapped us along in terms of the negotiations."
But Bessent predicted that "at the end of the day, we will come together" with plenty of points of negotiations to come over things like Apple (AAPL) iPhones and generic drugs (both of which are currently excluded from the 50% tariffs), and with Trump promising sector-specific tariffs on both fronts in the months ahead.
Stuck in the middle
In the meantime, other nations remain, perhaps, stuck in the middle with increasingly tense positions.
Japan is an example of a nation that struck a deal with the US but has seen significant domestic pushback to the terms. Japan’s top trade negotiator, Ryosei Akazawa, was scheduled to visit the US but canceled at the last minute.
He said at a press conference that more talks are needed in Tokyo as the nation pushes the US to follow through on a promise to lower duties on cars and car parts and resolve issues around "stacking" preexisting duties on top of what the nation hopes will be 15% universal tariffs.
It was just the latest example of a bumpy road that has lain ahead of nations that struck high-profile deals with Trump as they work toward actually implementing the complex provisions.
South Korea is in a similar boat, with that country's president visiting Washington this week in part to push the president for more favorable terms.
At a Cabinet meeting, Trump noted "they wanted to see if they could do something," though he added that the gambit had little effect and "we just kept the same deal."
The European Union also moved forward this week to advance legislation that would remove all tariffs on US industrial goods — a key demand from Trump before that deal can be fully implemented.
Source: finance.yahoo
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