American economist Steve Hanke has warned that US tariffs on India over Russian oil purchases will end up damaging America’s own economy and could push the United States into recession, creating a “major headache” for President Donald Trump.
“The US is on the verge of going into a recession,” Hanke said in an interview with Mint. “All the principles behind tariffs are negative and will push the US economy down. That, in addition to the slow growth in the money supply, will mean we have a recession coming. And once the recession comes, that will create a major headache for Trump.”
Hanke, Professor of Applied Economics at Johns Hopkins University and a former economic advisor to US President Ronald Reagan, described himself as a “free market economist, a classical liberal and a free trader.” He said: “I’m against all tariffs, all sanctions, all quotas, all non-tariff barriers. I’m for pure free trade.”
He explained that tariffs are effectively a tax on American consumers. “Indians don’t pay for the tariff. You don’t pay (tariffs) when you sell me something. I pay when I import from India if there’s a tariff. So that’s the whole economic rationale for tariffs. They destroy gains from trade,” Hanke said. “You can find very few economists in the world who are pro-tariffs. They’re all fundamentally and in principle free traders.”
On Trump’s sudden move to impose cumulative 50% tariffs on India, Hanke said it reflected the US President’s unpredictability. “Trump’s the kind of guy who could shake Modi’s hand in the morning and stab him in the back at night. And there’s no way to anticipate that kind of thing,” he said.
Hanke argued that India’s leadership role as “the voice of the global south” made it a target. “Trump wants to reduce the influence of the global south and BRICS. And that means he’s got to reduce the influence of India because India is leading.”
He compared this with US leniency towards China, pointing to Beijing’s dominance in mining, metallurgy, and material sciences. “China really has more cards than people think. It has what we say an ace up its sleeve…China dominates the world. They’re right up at the top in all three of those fields.”
Hanke also pointed to Trump’s pivot towards Pakistan, citing reports of talks over US use of Pakistani air bases in relation to Iran. “That is an aspect of the pivot. It kind of weakens the position of India in a way. Because the air bases are in Pakistan.”
Despite these pressures, Hanke said India should not react. “Waiting it out is the right thing to do. The Indian economy is in good shape now. It’s in pretty good shape. I think the Reserve Bank is doing a good job.”