Not an easy road for US
US may not be too happy with China refusing to give up either in trade war or South China Sea. Chinese continued military posturing in South China Sea with its infrastructure on artificial features in place seem to be a major concern generating a feeling of helplessness, due to relative inaction few years back. On North Korean front, the policy of good optics continues with Kim managing to get a lot of goodies from South Korea (presumably at their cost), during the last summit of North and South Korea. Kim in fact has been an outright winner, managing to get another Summit with President Trump, which helps him in convincing his countrymen of his sound leadership, as well as boosting his status internationally. US sanctions on paper continue, but after the chest thumping at Singapore Summit, his friends like China automatically relaxed the sanctions on North Korea, without any worthwhile denuclearisation/reduction in his nuclear/missile arsenal. US realises that knocking out China financially is the key to its global dominance; hence is unlikely to soften up to China. US also faces another challenge of keeping its allies like Japan and South Korea satisfied while negotiating with North Korea and asking ASEAN to make choices of partners, besides continuing with CAATSA hurting some of its strategic partners, who could be helpful in balancing China.
It will take some time to see that whoever has greater resilience to withstand the economic stand-off and appetite to take setbacks will have an upper edge, which seems to be US at this point of time. As per IMF assessment on 12 October 2018,the GDP could decline as much as 1.6 per cent in China and close to 1 per cent in the US, if the two countries further escalate the trade war and continue with retaliatory tariffs.
How is India affected?
The IMF has also estimated that other economies in Asia, would also see their economies slowing substantially, but it is true for countries which are heavily dependent on Chinese economy/supply chain. The Indian economy has survived some global slowdowns earlier and should be able to sail through the present one. The bigger problem for India arising out of US policy is the sanction under CAATSA in dealing with Russia for urgently needed military hardware like S-400 and Iran for cheaper crude oil being paid in rupee terms, for which India has adequate refineries. The US option of buying shale oil does not suit India as it does not have adequate refineries and will have to purchase finished product in dollar terms. The port of Chabahar is also crucial for India for connectivity to Afghanistan and CAR. The silver lining is that US being our strategic partner will like to have well equipped Indian Forces to balance China and Indian connectivity to Afghanistan, in case Pakistan does not serve their strategic interest. On both counts I am hopeful that US will find a way out not to hurt its strategic partner, as some of its officials had indicated that CAATSA is not to harm its allies/strategic partners. For the time being President Trump, who is vested with the authority to sign the waiver is maintaining a surprise for everyone to speculate, by making misleading statements. India, however, has given its intentions clearly of continuing to deal with Russia and Iran, and now needs to prepare for worst case scenario of being slapped with sanctions.
(The views expressed are personal views of the author, and do not represent views of any organisation. Major General S B Asthana can be reached as Shashi Asthana on Facebook, LinkedIn, Youtube and Google+, asthana_shashi on Twitter. website http://www.asthanawrites.org)