MARKET PERSPECTIVE

By J Mulraj

Aug 23-29, 2025

Are a geopolitical trap set by himself

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Author James Hadley Chase, in his book “The Paw in the Bottle” describes how monkeys are trapped in Brazil. A bottle containing nuts is left open; the monkey puts in its paw, grabs the nuts, but can’t, obviously, remove the paw, bloated with it’s contents. Too greedy to let go, the monkey is trapped!

Donald Trump, President of the world’s largest economy, USA, has two powerful desires. One, to be awarded the Nobel Peace Prize. And Two, to grab access to global mineral resources, especially rare earth minerals. If he doesn’t let go, he may have set himself a trap.

Trump can be called, with a little latitude, a man of peace. He wants a piece of Canada. He wants a piece of Panama. He wants a piece of Greenland. He’s a piece loving man!

He is now conflicted between trying to broker peace in the Russia-Ukraine war, on terms closer to Russian ones (Russia has clearly defeated Ukraine militarily) in order to fulfil his first desire, and trying to salvage enough for Ukraine, in order to get his second desire, ie to grab access to Ukraine’s mineral resources, as per an agreement signed last year by Trump and Zelenskyy.

Unless Trump lets one or both of desires go, there won’t be a peace agreement. He is, similarly trapped!

Ironically, even if he does let go, a peace agreement between Russia and Ukraine is almost impossible, due to the wide chasm between both sides’ offers. The conflict would, sadly, end after further military action, and even more unnecessary deaths, as outlined in my previous column.

The ludicrously high and unilaterally imposed tariffs, imposed without thought or discussion, has only served to distance American allies. Canada, which shares the longest border with the USA, and has been one of it’s largest trading partner, has distanced itself, repulsed by Trump’s crass suggestion to occupy a part of it, and the subsequent slapping of high tariffs, in a show of immature petulance.

In March Trump levied a 25% tariff on almost all Canadian products, raised to 35% we’d August 1, and doubled to 50% tariffs on Canadian steel and aluminium. However, items covered under USMCA ( US, Mexico, Canada trade agreement) are exempt.

Canada pivoted towards closer ties with EU in several sectors, including defence. It informed USA that it was not interested in buying F-35 stealth, 5th Generation, fighter aircraft (as did Switzerland, another badly treated ally.)

Similarly, Trump’s tariff war on China has resulted in a ban by China on soybean imports from USA. The orders have gone to Brazil, and US soybean prices have collapsed. This hurts Trump’s voter base.

Trump’s imposition of high tariffs on Indian exports, followed up with a secondary tariffs for it’s buying Russian oil, hence helping finance it’s war on Ukraine has had the unintended consequence of pushing it closer to China, against which the US had been cultivating it’s friendship to act as a bulwark. Besides the logic of the secondary sanctions is just full of holes.

Firstly China, which buys more oil than India does, faces none. It has rare earth minerals, which US (indeed no one) can’t do without. Secondly, the US itself continues to buy low-enriched uranium, copper and aluminium from Russia. Unless Putin is accepting Monopoly money for this, isn’t Trump, himself, helping finance Russia’s war efforts? And wasn’t it the US, under Biden, responsible for pushing Russia into invading Ukraine by repeatedly ignoring the Putin’s warning that grant of NATO membership to Ukraine was a red line?

Furthermore, Europe continues to buy Russian gas, more than India’s purchases of it’s oil; why doesn’t Trump sanction them?

Trump claims that his tariffs have resulted in a reduction in US debt by $4 trillion!. This, however, is based on a report by the Congressional Budget Office Report which states, that the $4 trillion reduction of debt because of tariffs is over a ten year period and is based on the assumption that the higher tariffs persist. The backlash by various countries suggest the high tariffs may not persist. Direction of trade will change, and new alliances will form or strengthen. Trump has, eg, undone the work of 5 previous administrations in building up a rapprochement with India, including it’s role as a bulwark to China.

India is the world’s #2 importer of defence equipment, after Saudi Arabia. SA is struggling with meeting it’s budgetary commitments at current oil prices and is likely to prune defence spending. India, making strides towards self sufficiency in domestic defence equipment manufacture, is unlikely to turn to USA for it’s purchases. It is peeved at the high secondary tariff for buying Russian oil, at Trump calling India a dead economy, and, most of all, by Trump claiming to have brokered a peace deal between it and Pakistan, (his eye is focused on that Peace Prize) which isn’t true.

US foreign policy seems to be hurting itself. By turning a deaf ear to Russia not to admit Ukraine into NATO, the US pushed Russia and China, it’s military and economic rivals, closer together. And now, Trump’s rant against India helping Russia, by buying its oil and so helping finance Russia’s war effort, is pushing India into developing closer ties with China. The rant on India ignores America’s purchase of Russian uranium, winks at China’s larger purchase of Russian oil (USA wants it’s rare earth minerals) and is mum about the EU’s larger purchase of Russian gas. That’s a lot of gas!

Net net, America will lose far more than it will ever gain, from it’s unilaterally imposed high tariffs. Erstwhile trading partners, including allies, are turning away in disgust. America’s largest exports are being shunned, like soybeans by China, F-35 jets by Canada and Switzerland, and others. A loss of trust by trading partners will take decades to rebuild by future Presidents. CBO’s estimated savings, over a decade, of $4 trillion, is a wispy mirage, incumbent upon the high tariff rates lasting for 10 years and not affecting the direction of trade. Brazil has already replaced USA in soybeans, as a more trusted partner, and Europe has replaced it in defence equipment.

One of the strengths of USA is in the semiconductor industry. Trump has blocked China’s access to two choke points, viz. Dutch ASML’s EUV lithography machine, and Taiwan’s TSML fabs, the world’s most advanced chip manufacturer. Silicon is the material used in chip manufacture. China is using material science to develop an alternative. It will have several challenges, but if it does succeed, it will allow China to take a lead. China is tripling production of AI chips to boost DeepSeek ambitions.

Last week the BSE Sensex ended at 79800, down 1506 points over the week.

Effective September, GST rates will be lowered, to, basically 2 slabs of 5% and 18% (rate for ‘sin’ goods is higher at 40% in a bid to follow the Commandment ‘Thou Shalt Not Sin’). More such economic and structural reforms are needed.

The BJP Government had once prided itself for reducing the wastage in social schemes, through it’s system of ‘Direct Benefits Transfer’, by, essentially, bypassing the middlemen responsible for the leakage.

What, the explains the fact that the Maharashtra Government has found 2.6 million fake claimants for a scheme ‘Ladki Bahin Scheme’ it had launched 13 months ago?. Were their eligibilities not vetted using Aadhar? And if they were, is Aadhar foolproof? If it is, the vetting is flawed. Each year new social schemes are launched, and there should be a regular audit. Else the Government will keep hiking taxes in increasingly innovative ways to fund the leakages.

An MLA in West Bengal was caught in a teachers’ recruitment scam, trying to escape by jumping over a wall. Think about it. Not only is he corrupt and misusing his position to get tax free money, he is also lowering the quality of education by taking bribes for ineligible teachers.

Those responsible for allowing such dastardly acts ought to be severely punished. Disproportionately long jail terms without bail, forfeiture of properties and lifetime disqualification for Government service. The next set of reforms should include swift investigations, swifter justice, harsher penalties and a disqualification from elections until his guilty verdict is overturned by the Supreme Court. At present a politician can stand for elections until his appeal is finally dismissed by the SC. Thus law makers love judicial delays.

The Russia Ukraine war would not be diplomatically settled as the negotiating postures are too wide to bridge. There are no signs that the Israel- Gaza conflict is nearing an end. Warring nations and their supporters fund the wars with unaffordable debt. Then go on to build more dangerous weapons. It’s a crazy world, much like Andheri Nagri Main Chaupat Raja.

The only possible good news for stock markets is the high probability of an interest rate cut by the US Fed in it’s September meeting. But that’s already been baked in the price. So caution is heralded.

Comments may be sent to jmulraj@asiaconverge.com