Trump Tariff's and Inflation (Part1)

What can Trump and Putin's meeting lead to eventually.....

If there is one thing which Trump Tariff’s should lead to in the US it is inflation. After all the US revenues from customs duties for the second quarter were $50 billion more than the previous quarter. This simply means that the prices of landed goods in the US has gone up. So it will eventually get captured in the inflation data.

Over decades countries like China have used their domestic industrial policy, production subsidies, labor restrictions and undervalued currency to keep their manufacturing competitiveness artificially high. The trade surplus (with US) that China generates (by exporting goods to the US) then finds its way as capital flows into America buying bonds and stocks.

Thus on one hand there is availability of cheap goods to the US consumer and on the other hand there is foreign flow into US bonds and stocks. No wonder then the US savings rate is artificially low and the US retains Trade deficit since many decades.

Trump is out there to correct this imbalance. That’s fine but what about inflation. So just one of the ways to bring inflation down is to get the price of oil down. This can happen if excess oil flows into the world economy. Russia and also Iran have US sanctions.

Now factor in this news from Reuters. Russia decree opens door for Exxon return to Sakhalin-1 project

More specifically this article mentions “decree was published as a follow-up to one Putin signed in October 2022, which ordered the seizure of the Sakhalin-1 project.

Exxon previously held a 30% operator share in the lucrative project, and is the only non-Russian investor to have quit its stake.

Exxon did not immediately reply to Reuters request for comment.

The path to Western investment returning to Russia is unclear given the U.S. and European Union would need to lift far-reaching sanctions to facilitate investment. Companies who might wish to return, having spent significant amounts of money to exit the country three years ago, also face high barriers put up by the Russian government.”

Lets look at the next Trump and Zelenskyy's meeting with European leaders marks a historic moment

So a Trump Putin meeting followed by this. If a Russia Ukraine deal (or no deal just cessation of hostilities) takes place in the next few months then Russian Oil can start flowing into Global markets.

The market already anticipates this.

So far so good. What happens to Indian Economy if all this pans out. Remember India just got a rating upgrade. (To be contd…)