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India caught in middle as Trump tests out new Russia policy
With friends like these! President Donald Trump on Wednesday announced a new 25% tariff on India, one of the US’s closest allies in Asia.
Although India is a “friend”, Trump said, the country’s notoriously high trade barriers had prevented more commerce with the US. The new measures will go into effect on Saturday.
The move comes smack in the middle of rocky, ongoing trade talks between the US and India. Trump wants to crack open India’s vast market for American firms, while India is keen to protect certain domestic industries – particularly pharmaceuticals, auto parts, and agriculture – as well as the access of Indian students and high-skilled workers to the US.
India is in a tough spot – as Trump carries on talks with various countries at once, PM Narendra Modi doesn’t want to get stuck with a higher US tariff rate than other export-oriented Asian competitors who are all jockeying for access to the massive US market.
But Trump has put Modi in another, even trickier bind. He said India will pay a “fine” for its purchase of Russian oil. While details have yet to emerge, this looks like the first instance of Trump using so-called “secondary sanctions” to pressure Vladimir Putin, who has serially ignored Trump’s ongoing demands to end the war in Ukraine.
Earlier this month Trump threatened a tariff of 100% on any countries that trade with Russia unless the Kremlin stops the war within 50 days. This week he cut the deadline to “10 or 12 days.”
India is one of those countries, big league. Delhi purchases roughly 2 million barrels of oil daily from Russia, accounting for 40% of India’s total oil imports. That amount reflects a huge boost in Russian imports after 2022, when European sanctions over the invasion of Ukraine made Russian crude way cheaper for non-European buyers.
Analysts say that India could certainly go back to its traditional suppliers in the Middle East and Africa, but it would have to accept significantly higher costs compared to the blackballed Russian crude it’s gotten used to.
The dragon in the room. Still, if Trump is serious about landing a blow on Russia’s oil-dependent economy, he’ll sooner or later have to look towards the other
billion-person Asian power that gulps down Kremlin crude. China imports more than 2 million barrels of the stuff a day, about a fifth of its total imports. Together with India, the two countries buy more than 80% of Russia’s oil exports, accounting for about 5% of overall global crude demand.
Beijing is also Russia’s largest trade partner overall. With the US locked in tricky trade talks with its biggest global rival, is Trump ready to swing the secondary sanctions hammer at Beijing too?
U.S. President Donald Trump speaks next to Federal Reserve Chair Jerome Powell during a tour of the Federal Reserve Board building, which is currently undergoing renovations, in Washington, D.C., U.S., July 24, 2025.
Why is Trump threatening the Fed, and why does it matter?
On Thursday afternoon, just before golden hour, President Donald Trump threw a white hardhat over his flaxen coif and strode into the Federal Reserve building on Constitution Avenue.
The stated purpose of his visit to the world’s most influential central bank was almost comically mundane: he was there to inspect a building renovation project for cost overruns. Trump is, as he likes to remind people, a “builder,” so he knows an overpriced crown molding when he sees one. He says the $2.5-billion project, funded by Congress, is already more than $500 million over budget. The Fed disputes this number.
Sure enough, after a walking tour of the sites with Fed Chairman Jerome Powell, the two men sparred about the costs of the buildings that are currently being rebuilt by the Fed – and at least one that is not being built because, as Powell gamely pointed out, it was already built five years ago.
But the hardhat haggling was pantomime for a more serious dispute.
For weeks now, Trump has been insulting and pressuring the “numbskull” Powell to lower interest rates, in hopes that doing so will give the US economy, “the hottest in the world,” a boost. The midterms are, after all, approaching.
But Powell isn’t budging. He argues that with Trump’s tariff threats still nudging up prices, lower rates could set inflation soaring all over again. The Fed’s legally-mandated job is to keep inflation low and growth humming – without presidential meddling.
More alarmingly, Trump has recently pondered removing Powell – whom he nominated as Fed chair eight years ago – before his term ends next spring. Doing so would be an unprecedented assault on the Fed’s independence. Under the law, a president can sack a Fed chair only for serious violations of the law or ethics.
Disagreements over interest rate policy are not that. But an allegedly botched building renovation that has cost taxpayers hundreds of millions of dollars in cost overruns? Maybe it’s malfeasance enough. And while Trump said yesterday that firing Powell because of cost overruns would be a “a big move” that is “not necessary” right now, the visit sends a clear message: this is an issue that can be brought up again if Powell doesn’t, as Trump insists, “do the right thing.”
So what is “Fed independence”? And why is it a problem if it suffers?
To learn more I rang up one of the smartest global economy analysts out there – Rob Kahn, Managing Director of Global Macro at Eurasia Group. Our exchange has been edited for clarity and concision. Here goes.
Rob, why is central bank independence so important, and to whom?
When a central bank is subservient to the government, it will often make decisions to keep interest rates too low. And as a result you get too much money printed up and then more inflation.
There is a vast body of evidence that says that economies that have independent central banks do better. They tend to have lower inflation and higher growth. When everyone – financial markets, firms, households – can make longer-term investment and spending decisions based on stable accurate expectations about what the future will hold, they make better decisions and they have better outcomes.
Economies just perform better when individuals have reasonably stable expectations about what inflation's going to be this year, next year, five years from now.
If Trump forces Powell to cut rates, or replaces him with someone who does that, what might happen?
The first thing to remind people of is that the Fed doesn’t actually control all the interest rates in the economy. They control the so-called “federal funds rate,” which is the rate at which banks lend to each other. By doing that, they can influence all the other interest rates in the economy, but they don’t control them directly.
If the Fed were perceived to be cutting rates under pressure from Donald Trump, you might see that even though the Fed funds rate went down, other lenders would say, “Wow, in the longer term we’re going to have higher inflation, so we’re going to actually need higher interest rates ahead of that.” So even though the Fed rate goes down, the market rates for a lot of people could actually go up.
Why is Trump’s hardhat visit so alarming for people worried about Fed independence?
Well, if they can fire the Fed chair for overspending on a building project, then you know that any time a president has a disagreement with the Fed chair in the future, he can just come up with something and say, “oh, this is the real cause,” and fire him for that.
And that will effectively undermine the Fed’s independence. So Trump in a hard hat is really not about a renovation. This is really about whether the Fed can be independent in setting monetary policy. Don’t be fooled.
Jair Bolsonaro, Donald Trump, and Luiz Inácio Lula da Silva.
Why Trump’s tariffs on Brazil will backfire
The president of the United States is overtly meddling in Brazil’s domestic politics. It's hard for Americans to even imagine that another country would dare threaten to tank the Dow unless the Supreme Court overturned a ruling or Congress repealed a law. Democrats and Republicans alike would howl if China tried to do that. Yet that's exactly what President Trump is doing to Brazil: flexing economic muscle to dictate the internal policies of a sovereign nation (and a democratic one, to boot). So much for his promise not to lecture other countries on how to govern their affairs (he should’ve clarified: as long as their leaders earn, or buy, his personal favor).
It’s a corrupt (ab)use of executive power. The Trump administration has articulated a number of shifting and often contradictory aims to justify its tariffs: shrinking bilateral trade deficits, raising revenue, reshoring supply chains, creating manufacturing jobs, squeezing China, wringing better deals. It’s certainly the case that some of these goals make less sense than others, tariffs aren’t always the right tool for the job, policy execution has been sloppy (remember the formula?), and Trump’s negotiation skills haven’t been up to snuff. But at least most of the tariffs have been guided by Trump’s sense of the national interest. They accordingly amount to legitimate statecraft. Not so with the Brazil tariff, which the president’s letter justifies purely on political grounds. There’s no national‑interest fig leaf – just an open bid to help a political opposition leader he likes.
It's also plainly illegal. Since “Liberation Day,” the White House has invoked a bunch of statutory authorities to unilaterally levy tariffs without Congressional legislation, most notably the International Emergency Economic Powers Act (IEEPA). Usage of this law rests on the notion that the tariffs are a remedy for a “national economic emergency.” The US Supreme Court has yet to rule on the legality of IEEPA tariffs; it will probably do so in the fall, when I expect it to curb the president’s authority. But whatever the justices decide, we already know that the president doesn't have the legal authority to impose a tariff solely because he disagrees with the target’s domestic politics.
President Lula has no ability to give in to Trump’s demands. Even if he wanted to appease Trump, both Bolsonaro’s trial for plotting to assassinate Lula and overturn the 2022 election – a “witch hunt,” per Trump – and the new social media rules – seen as “censorship” in Washington – are beyond Lula’s constitutional jurisdiction. For Brasília they are non-negotiable matters of sovereignty. Nor does Lula have much trade leverage. Many US imports already face low duties; while Brazil could plausibly lower tariffs on some US goods like ethanol, deeper cuts require agreement by all four Mercosur members and their legislatures.
Even if he had the means to offer Trump the concessions he demands, Lula has no incentive to back down. On the contrary, the Brazilian president sees an electoral opportunity to lean into the tariff fight with the US at Bolsonaro's expense. Lula entered the 2026 campaign cycle as an unpopular incumbent presiding over a soft economy. Much like Trump’s “51st state” threats against Canada rallied Canadians around the flag and helped the Liberal Party’s Mark Carney stage a spectacular comeback, Trump’s threat to Brazil’s sovereignty and economy in direct support of Bolsonaro just handed Lula a flag-wrapped gift. It’s good politics for him to escalate the clash against Trump, cast himself as defender of Brazilian sovereignty, and blame his domestic nemesis for both the extremely unpopular foreign interference and any economic pain.
Don’t feel too bad for Bolsonaro. The former president has been trying to persuade Trump to more actively support him for months. Bolsonaro’s son Eduardo – a lawmaker who’s close with Trump’s sons and a top contender to succeed his father as the right-wing challenger to Lula – has been in Washington lobbying the White House for targeted financial sanctions against Supreme Court Justice Alexandre de Moraes, the lead judge in Bolsonaro’s trial (and, incidentally, a key champion of the social media regulation). Eduardo’s success in getting Trump to take up his cause is matched only by his failure to grasp the extent of Trump’s tariff obsession. Now he faces legal jeopardy at home for inviting foreign aggression, and his father’s grievance politics may finally come back to bite him. Whatever happens in 2026, the Bolsonaros have no one to blame but themselves.
The fight is set to get worse. Lula stepped up the escalatory rhetoric, refusing to accept Trump’s letter and threatening mirror tariffs. Diplomats will hunt for an off-ramp and try to buy time, but neither side is likely to blink before Aug. 1. The aggregate economic damage of 50% tariffs is manageable – Brazilian exports to the US account for less than 12% of Brazil’s total exports and about 2% of the country’s GDP, and some products (like oil) and sectors where Brazilian exporters have leverage are likely to be exempted. Trump’s letter also left the door open for individual companies to get waivers if they promise US investments. Still, the Brazilian industrial sector is highly dependent on the US export market (especially in products like steel, aerospace, cell phones, tools, and coffee), so the tariff won’t be entirely painless.
The cleanest de-escalation route runs through Bolsonaro himself: he’d need to directly ask Trump to ease or drop the tariffs, probably once the industrial lobby gets too loud and Lula’s poll numbers rise beyond comfort. That scenario is likelier than Lula caving or Trump unilaterally backing down. The White House has already ordered a Section 301 probe into various Brazilian policies that will give Trump a legally sturdier mechanism to impose sky-high duties on Brazil should courts clip his IEEPA wings.
Trump’s gambit will boomerang. The tariff will prop up his ally’s arch-enemy Lula, hurt US consumers (say goodbye to cheap cafezinho and OJ), and nudge Brazil closer to China and the EU – and away from Washington. As Trump keeps doing his darndest to deglobalize America, expect this pattern to keep repeating itself.
Graphic Truth: Federal employment already dropping
The US Supreme Court on Tuesday allowed President Donald Trump to proceed with widespread cuts to the federal workforce, pending a full trial, overruling a San Francisco judge’s order in May that temporarily blocked layoffs at 22 agencies. Prior to the Supreme Court’s ruling, thousands of government employees had been preparing for mass layoffs, with many notified of their pending terminations but awaiting official confirmation.
Here’s a look at the changing size of the federal workforce, which includes the US military, since Trump first took power in 2017.
Elon Musk in an America Party hat.
Elon Musk is about to discover that politics is harder than rocket science
“Today, the America Party is formed to give you back your freedom,” he announced a day after President Donald Trump signed into law the One Big Beautiful Bill Act (OBBBA), the deficit-busting tax-and-spend package that Musk had blasted as a “disgusting abomination.” The megabill that broke the bromance will add an estimated $3-4 trillion to the deficit over the next decade thanks to large tax cuts for the wealthy and corporations, increased spending (especially for defense and homeland security), and higher debt interest payments, making what’s already an unsustainable fiscal situation much worse. If some of the law’s now-temporary provisions are eventually made permanent, as this bill did for the 2017 “temporary” tax cuts, the total cost could be as much as $6 trillion. “When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy,” Elon wrote on X.
What exactly does the America Party stand for? Details are scarce, but Musk says his goal is to disrupt the uniparty’s hold over American politics and reduce federal deficits (oh, and uncover the real Jeffrey Epstein story) – for real this time. Elon went all-in on support for Trump in 2024, who in return installed him to lead the Department of Government Efficiency’s efforts to slash government spending. Himself a disruptor of the uniparty, President Trump has broken with bipartisan consensus on immigration and foreign policy, tightening border enforcement and actually trying to end foreign wars (even if not very effectively). But Trump has governed like a card-carrying uniparty member when it comes to expanding the size and cost of government.
This grievance is the core driver behind Musk’s creation of the America Party. He was right to ask ‘what the heck was the point of DOGE’ once the OBBBA’s debt blowout was codified – although in fairness to Trump, DOGE did deliver less than $175 billion in “savings,” a rounding error in the overall federal budget and far short of the $2 trillion in “waste, fraud, and abuse” Musk had promised to cut initially. Even before the ink dried, the bill was polling deep underwater with the American people. But most voters hate the OBBBA not because it increases the deficit and debt, but despite it. By revealed preference, voters support politicians who spend on them and punish those who threaten their benefits or raise their taxes. It’s no wonder that the biggest wealth transfer from the working class to the top 1% in modern US history, which kicks more than 10 million Americans off Medicaid to make the rich richer, is so deeply unpopular. But fiscal discipline? That has had no real constituency in our spend-happy nation – and, accordingly, no home in either major party – for a very long time.
The America Party faces a product-market-fit problem that everyone but Elon seems to recognize. Most voters claim to be deficit hawks in the abstract – it sounds so serious and responsible! – but few support the broad-based tax increases and spending cuts on everything from entitlements and healthcare to defense, education, and border security that balancing the budget entails in real life.
If Elon wanted to create a party that represents the interests of “the 80%” of Americans “in the middle” and not just a fringe of too-online libertarians, its platform would have to consist of higher taxes on the wealthy and corporations, cheaper healthcare, childcare, energy, and housing, congressional term limits and lobbying reform, common-sense gun regulations, comprehensive immigration reform, and other such policies supported by bipartisan majorities. Some positions may be accommodated by one or the other major party, whether now or in the future. It’s even possible that there may exist a majority for an economically populist, socially moderate third party today. But there’s definitely no popular appetite for the kind of America Party that Elon has in mind.
So, does that mean that Elon is going to fail? Not necessarily ... but probably.
On the one hand, unlimited funds plus razor‑thin congressional majorities equal mischief potential. We’re talking about the wealthiest dude in the world perhaps being willing to throw a blank checkbook at America’s coin-operated political system. Musk poured nearly $300 million into GOP campaigns in 2024 and happily spent over $20 million on a single Wisconsin Supreme Court race earlier this year. And while he’s highly unlikely to be able to get America Party candidates elected to Congress, he may not need to. Musk could plausibly influence primaries, spoil close races, and force Republicans to tack (slightly) toward fiscal discipline. His stated goal of controlling “2 or 3 Senate seats and 8-10 House districts” by 2026 sounds modest until you remember that four Senate races and 11 House contests were decided by under two points in 2024. In a 50‑50 nation, margins that slim turn even a 2% spoiler vote into real leverage. And if he’s willing to burn, say, $250 million coaxing ten safe‑seat incumbent Republicans to switch jerseys, he could build himself a small blocking coalition in the House with veto power over key legislation before voters ever see the America Party on a ballot.
On the other hand, not even Musk’s eyewatering fortune is likely to be able to override the laws of political physics that have humbled every third‑party crusader before him. America’s deep-rooted two-party presidential system is designed to strangle third parties in their crib: first-past-the-post, winner-take-all elections herd voters into two big tents, and state ballot-access and federal campaign-finance laws pose formidable entry barriers even for someone with Musk’s resources. Worse still, there are fewer true independent voters than polls suggest: most Americans who dislike both major parties (and there are many of us) tend to hold their noses and often vote for one of them, fearing “wasting” their ballot. The few voters out there who actually affiliate with neither party and are open to voting for a third party don’t agree on much with one another – certainly not on an uncompromising commitment to austerity. Musk may soon discover that building a successful third-party bid in America, especially one centered around Making Fiscal Responsibility Great Again, is not rocket science … it’s harder.
Then there’s Elon himself – a wellspring of liabilities matched only by the depth of his pockets. There’s no denying that he’s a generationally talented entrepreneur and an incredibly hard worker, but the mercurial billionaire’s popularity trails even Trump’s, his attention span is legendarily short for ventures that aren’t core to making him money, and he has a history of not following through on his most outlandish and overconfident promises. Leading a political party will cost him a fortune, distract from his business activities and humanity-saving mission, end in failure and frustration, and otherwise make his life more difficult than it needs to be.
This is especially true if President Trump reacts as viciously against Musk’s betrayal as I expect him to. Should he decide that Musk’s America Party threatens not just MAGA’s political agenda but his personal spotlight, there’s no telling how far he’ll be willing to go to punish him – and to what extent he will be constrained by the rule of law in doing so. Based solely on what Trump has gotten away with doing to other people who have harmed him far less grievously, Musk’s federal contracts, tax subsidies, even his security clearance and US citizenship could be on the chopping block. That risk alone may deter Elon from sticking with this effort for very long, and would-be recruits (many already skeptical about Elon’s long-term commitment to the bit) from joining it.
Musk may yet scare a few vulnerable incumbents or win over the handful of principled libertarians like Rep. Thomas Massie (R-KY), but the structural logic of US politics still points to a binary choice in 2026 and 2028. If the history of US third parties is any guide, his latest moonshot will flame out faster than a Tesla battery. Even in the strongest-case scenario, the America Party is likely to end up looking more like a successful pressure group – something closer to the Tea Party, the Club for Growth, or the Sierra Club – than an electable third party.
Of course, the man who builds reusable rockets and is landing them on barges in the middle of the ocean thrives on low-probability bets. So keep an eye on the launchpad and enjoy the show. After all, even if the party fizzles, Musk is always sure to deliver the one thing Americans consistently reward: entertainment value.
Graphic Truth: The BRICS+ in a "G-Zero" world
The BRICS, a loose grouping of ten “emerging market” economies led by Brazil, Russia, India and China, held their 17th annual summit in Rio de Janeiro, Brazil, this weekend. While the official readout from the summit emphasized their commitment to multilateralism, the guestlist begged to differ. Five of the 10 leaders were no-shows, including Chinese President Xi Jinping and Russian President Vladimir Putin.
While the group’s declaration took aim at tariffs increases and recent attacks against Iran, it stopped short of mentioning the US or naming President Donald Trump directly. For more, here’s GZERO writer Willis Sparks’ explainer on why the BRICS are a bad bet.U.S. House of Representatives Speaker Mike Johnson walks back to office, as Republican lawmakers struggle to pass U.S. President Donald Trump's sweeping spending and tax bill, on Capitol Hill, in Washington, D.C., U.S., July 3, 2025.
What We're Watching: House folds on Trump bill, Beijing lashes out at US-Vietnam deal, Nigerian opposition unites
House holdouts bluff then fold on Trump’s budget bill
The US House is set to pass President Donald Trump’s epic tax-and-spending bill any minute now. Some eleventh hour House Republicans holdouts had signaled that they would oppose the broadly unpopular bill because it boosts the national debt by trillions while threatening to leave millions without health insurance, but they quickly fell in line after under direct pressure from Trump. The imminent final passage of the bill will fulfil Trump’s wish to have the landmark legislation on his desk by the Fourth of July holiday.
US-Vietnam trade deal angers Beijing
The US and Vietnam struck a preliminary trade deal to lower their bilateral tariffs yesterday, and China is not happy about it. Why? Because as part of the deal the US will heavily tariff any goods that pass through Vietnam from another country en-route to the US. That’s a direct swipe at Beijing, which does this frequently to skirt high US tariffs. China’s commerce ministry said it “firmly opposes any party striking a deal at the expense of Chinese interests” and threatened “countermeasures.”
Nigeria sees huge political shakeup as opposition leaders join forces
In one of the biggest shake ups since the end of military rule in 1999, Nigeria’s two main opposition leaders – Atiku Abubakar and Peter Obi – have joined forces to try to oust President Bola Tinubu in the 2027 election. In the 2023 election, they won a combined 54% of the vote compared to Tinubu’s 37%, meaning a common front could win. The big question: Which of these two political heavyweights will agree to play second fiddle to the other when it comes time to pick a presidential candidate?U.S. Senator Thom Tillis (R-NC) speaks to reporters between votes at the U.S. Capitol building in Washington, U.S., January 23, 2024.
What We’re Watching: Senate vote on Trump’s big bill, Thai PM in hot water, Japan's name-change game
Trump’s tax-and-spending bill faces razor-thin Senate vote
The US Senate will vote today on President Donald Trump’s “Big, Beautiful Bill”. The legislation would make many of Trump’s 2017 tax cuts permanent and would boost spending on the military and immigration enforcement, but its proposed cuts could also leave nearly 12 million people without health insurance by 2034. That, and a projected $3.3 trillion national debt increase over the next decade, has stoked opposition even within the Republican party. GOP Senators Rand Paul and Thom Tillis – who announced he won’t seek reelection – are already opposed, meaning Trump can afford only two more defections. Expect today to be a marathon of votes and revisions to the legislation.
Thailand’s PM in hot water over cross-border phone call
Thousands of protestors gathered in Bangkok yesterday, demanding the resignation of Prime Minister Paetongtarn Shinawatra over a leaked phone call in which she was heard obsequiously flattering Cambodia’s still-influential former leader Hun Sen. The call played poorly in the light of a recent border spat between the two countries. Paetongtarn defended the call as a negotiation tactic, but the streets say she’s compromising Thailand’s sovereignty. Thailand’s Constitutional Court will rule this week on a petition calling for her removal.
Japan’s name change game
A campaign is afoot in Japan to relax a law that effectively requires women to take their husband’s last names. Proponents of the change, which is supported by most Japanese, say it will increase gender equality, boost Japan’s alarmingly low birthrate, and avoid a situation in which, over time, everyone ends up with the most common last name: “Sato.” But the governing LDP’s hard-right wing is opposed, and with an upper house election in July, the party wants no trouble. For now, “Satos all the way down” looks like Japan’s destiny after all.