US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng to discuss trade issues at Madrid, Sept 14-15, 2025
How far US President Donald Trump’s goodwill towards India and its PM Narendra Modi via social media would translate into action remains to be seen. Trump does have a master plan in mind to put pressure on India with the additional tariff of 25% to get Modi to persuade Russian President Vladimir Putin to freeze the Ukraine war.
It has not worked so far. By end-September only we’ll know for sure the future trajectory of India’s oil purchases from Russia. Adani-run Mundra Port has stopped receiving Russian oil.
The big picture is that Trump expects India to replace Russian oil with additional purchases from the US. In our tunnel vision, we are not grasping that while the primary motivation behind Trump’s additional 25 per cent tariffs on India might be to hit Putin, his overall strategy is actually far more nuanced.
According to the well-known American strategic thinker George Friedman (Chairman, Geopolitical Futures), the fundamental issue here is two-fold — namely, putting pressure on Russia to bring the war in Ukraine to a halt and, second, ending the US’ ‘dual relationship’ with China.
Friedman explains: “The dual relationship with China is we [US] are economically dependent on China. China is dependent on us but we are hostile in the military dimension. It is very dangerous to be economically dependent on a country which is constantly carrying out military actions that appear to be preparations for war against the United States. So, you can’t have a dual path. You can’t both be very closely integrated economically and hostile militarily.
“So we want to have closer relations with the Chinese. We need that. They need that.”
Therefore, “taking India off the table as a military ally … was a major gift to the Chinese. That is not necessarily one that we will continue if the Chinese don’t respond properly. But at the same time, it signalled two ways. And it was two ways.
“The Russians read it as a demand and they didn’t respond very well. The Chinese have been somewhat quieter recently. Obviously, the Chinese and the US are sort of in the midst of a negotiation. They’ve reached a temporary accord after the tariff escalation earlier this year.”
China is hanging tough
Simply put, the outcome of US Treasury Secretary Scott Bessent’s talks in Madrid on September 14-15 with Chinese Vice Premier He Lifeng, their fourth major in-person meeting, will be keenly watched. On Saturday, China announced a tough stance by initiating an anti-discrimination investigation into US trade policy on trade in chips and a second investigation into suspected dumping of some US analog chips.
In a separate statement on the Madrid talks, China also asked, “What is the US’ intention in imposing sanctions on Chinese companies at this time?” China is hanging tough, as the two countries seek to maintain a trade truce that reduced retaliatory tariffs on both sides and restored the flow of Chinese rare earth minerals to the US. Trump had approved the extension of the tariff pause until November 10.
Meanwhile, Bessent and USTR Jamieson Greer issued a joint statement Friday calling on G7 Finance Ministers that “if they are truly committed to ending the war in Ukraine, they should join the United States in imposing tariffs on countries purchasing oil from Russia.”
The statement said, “Thanks to President Trump’s bold leadership, the United States has already taken dramatic action against the purchasers of Russian oil. We are encouraged by the assurances of our fellow G7 nations that they are committed to ending this war, and we are hopeful that they will join us in taking decisive action at this critical time.”
Trump has also addressed the NATO allies stating his readiness to impose “major Sanctions” on Russia provided all NATO Nations STOP BUYING OIL FROM RUSSIA” plus “NATO, as a group, placing 50% to 100% TARIFFS ON CHINA.”
Trump wrote, “China has a strong control, and even grip, over Russia, and these powerful Tariffs will break that grip.” So, he challenged the European allies, saying, “If NATO does as I say, the WAR will end quickly, and all of those lives will be saved! If not, you are just wasting my time, and the time, energy, and money of the United States.”
That said, with China-US tango, one can never tell. An important Xinhua commentary late last night on the upcoming Madrid talks sounded conciliatory. It says, “The inclusion of TikTok in the discussions in Spain once again demonstrates their continued commitment to resolving differences through dialogue.
“China urges the United States to… find solutions that ensure an open, fair, just, and non-discriminatory business environment for Chinese companies, including TikTok, to continue operations in the United States.
“At the heart of China-US economic relations lies mutual benefit and win-win cooperation. Complementary strengths and shared interests have driven cooperation between businesses and people on both sides… The upcoming talks [in Madrid] represent not only an in-depth dialogue… but also a crucial interaction that concerns global confidence and stability.”
India gets used as a tool
This issue took a trans-Atlantic turn with the EU’s attempt to hinder the US-Russia negotiation process on Ukraine following the Trump-Putin meeting in Alaska. The EU first made an unsuccessful attempt to get the US involved in providing “security guarantee” to Ukraine. When Trump stonewalled, the EU switched tacks and proposed that the US could join the 19th package of sanctions against Russia in the pipeline.
Trump agreed but added a caveat that the EU should first terminate all imports of Russian energy. (In 2024, the EU officially paid €21.3 billion for Russian energy supplies.) The EU has two ways to abandon Russian energy resources. The first is to completely stop directly purchasing oil and gas. Brussels recently presented a “road map” for achieving this goal by 2028.
The second path, which also Trump is pushing, entails the EU to stop buying Russian energy resources through third countries — including stopping the purchase of all petroleum products that are processed, for example, in India, and then end up in Europe.
Basically, the introduction of restrictions against Russia will depend on the dynamics of Russian-American relations. Additional sanctions on Russia could complicate the dialogue on the Ukrainian settlement. Trump is reluctant to take tough measures against Russia that would make his conversation with Putin more difficult and less productive. While Trump keeps saying from from time to time that he is “disappointed” and “dissatisfied” with Putin, he does not abandon attempts to move forward in the direction of resolving the Ukraine conflict.
Therefore, if at all Trump agrees to join the 19th package of EU sanctions, it will hinge on EU completely ending import of oil from Russia and imposing secondary restrictions against countries that actively buy energy resources from Russia.
Trump’s preference is to increase pressure on those countries for which he has already imposed increased tariffs, such as India. He would like this tariff regime to become universal. And he estimates, rightly so, that the accession of the EU would create a certain cumulative effect, which in turn would make it possible to twist the arms of India and Brazil — and in future China too — more confidently.
However, Brussels is not ready for taking radical steps against Beijing. China remains the EU’s second most important trading partner, and the EU fears possible retaliatory measures by China. As for India, Ursula von der Leyen is on record that the European Commission expects to complete negotiations on a free trade agreement with it by the end of 2025. Unsurprisingly, Modi is reaching out to the EU leadership too.
The bottomline is, as Friedman’s hypothesis concludes in somewhat stark terms, India faces the home truth that it is “not having equal powers as Russia and China might have with the United States” and that it “might get used as a tool. This is in the nature of things.”
Friedman concludes: “Now, undoubtedly, these tariffs will be stopped in due course. They will only be for a time. But at the same time, this is the problem of weaker nations trying to play games with very strong nations. They get used.”