US President Donald Trump imposed an additional 25% tariffs on India on Wednesday over purchasing of Russian oil amid war in Ukraine. The tariffs on India have now doubled to 50%, which is one of the highest levies imposed by the US on foreign countries. The new rates will come into effect from August 27. When BBC journalist asked Trump why he was singling out India and not other countries that also buy oil from Russia, the US Prez said that it had only been a few hours since his announced the new rates and that “a lot more” tariffs will follow. “You’re going to see a lot of secondary sanctions,” Trump said.
But what do secondary sanctions mean?
Let’s first understand the concept behind “secondary tariff” which is that when a country (like the US) levies a certain percentage of tax as a penalty on one country’s goods, not to punish that country directly, but to indirectly influence, or in other words, put pressure on another country.
For example, the US is putting higher taxes on Indian goods. But the real target is Russia. The US wants India to stop buying oil from Russia. So, it’s using tariffs on India to try and influence India’s actions toward Russia.
This idea is similar to secondary sanctions, where the US doesn’t just punish the country it has issues with, it also punishes others who do business with that country, hoping they will stop helping it. In short, it’s a way to hurt or pressure a country indirectly, by going after their trading partners.
Are secondary sanctions similar to secondary tariffs?
A Bloomberg report explains that the United States uses something called secondary sanctions to make its main or primary sanctions more effective. These primary sanctions enforce rules that directly stop American companies and people from doing business with certain countries.
But secondary sanctions are different. Under these, they go after people, companies, or banks in countries outside the US, provided if they’re doing business with someone already under US sanctions. Even though these deals happen outside American borders, the US still tries to stop them.
Why does the US do this?
The goal is simple. It is to force foreign companies or banks to pick a side, either continue working with the country that has been sanctioned or choose doing business with the US. But they can’t do both.
Since many businesses rely on the US dollar and need access to the US market, they often tend to abide by these rules, even when they are not legally required to follow them in their own country. It’s important to note here that the US dollar is used globally and the American financial system thus plays a major role in international trade. That gives US a lot of power.
What happens if someone breaks these rules?
The Bloomberg report explains that if secondary sanctions are ignored, the US can actually block access to American exports and freeze any money or assets they hold in the US. It can also put them on a blacklist (officially called the Specially Designated Nationals and Blocked Persons List), which means no American company or citizen can do business with them. This can seriously harm their business, especially if they rely on the US dollar.
What about Trump’s ‘secondary tariff’ on India?
Donald Trump announced an additional 25% tariff on goods coming from India. He called it a “secondary tariff”, but it’s not like a regular secondary sanction.
Why? Because there’s no active US tariff or sanction on India’s oil trade with Russia. In fact, the US already banned Russian oil in 2022 after the Ukraine war began. So, Trump’s move isn’t building on an existing ban like true secondary sanctions do.
So, what is this tariff really about?
Bloomberg says that this new tariff looks more like a pressure tactic. Trump wants India to stop buying oil from Russia. By making Indian goods more expensive in the US market, he’s trying to push the Indian government to follow the US and ban Russian oil. The bigger goal here is to cut off Russia’s oil income, which is a major source of funding for its war against Ukraine.