After a year, the Trump Administration’s tariff drama is back on the table, with a more targeted, tougher design. Last year, it was the US’s standard tool of economic coercion to advance economic diplomacy and strengthen its economic influence. This time, however, it comes more from desperation and is meant to raise the stakes in deterrence against Russia and Iran. But unleashing economic coercion through a series of sanctions and tariffs will help the US, and it also risks straining relationships with strategic partners.
The Last Year
The Trump Administration’s strategy last year involved heavy economic attrition, leveraging prolonged trade negotiations to pressure a counterpart into aligning with geopolitical goals, often by creating economic uncertainty or exploiting asymmetric dependencies. Unlike other countries that faced standard US coercion with only tariff threats, India was hit with multiple salvos: tariffs, penalties and an embrace of Pakistan. The reasons were clear: the Russia factor, trade with Iran and India’s non-compromising posture during trade negotiations. Last year, economic salvos and trade calculations did not drive these deals alone. The US used these trade deals as geopolitical tools, deliberately engaging in exhaustive negotiations to push countries towards aligning with its strategic objectives.
Although this economic coercion is still in the works, in a limited fashion, recent US-Canada tensions are one example. However, there is a gradual shift in these tactics, and they have become more targeted and a means of deterrence, to control and spiral into conflict in ongoing escalations in Iran and the Russia-Ukraine conflict.
The Targeted Shift
Economic coercion has recently shifted: instead of using it as an economic diplomacy strategy, it is now directed toward the conflict spectrum. A recent example is Operation Economic Outcast, but this coercion was more operational in design than institutionalised; i.e., Operation Economic Outcast can go to any length and breadth of targeted objectives, while procedures and objectives limit institutionalised coercion. However, institutionalised coercion is harder and more severe than operational ones because it carries the absolute monopoly on legal violence and permanent structural exclusion. In other words, it is a legalised form of coercion that can sustain long-term harm with little reliance on market forces, networks, etc. Institutionalised coercion is harder to escape because of its legitimacy, application, and political-bureaucratic will.
The impact test of this institutionalised coercion shows that, beyond initial structural damage, the long-term impact, as many argue, shifts toward resilience and alternatives, which, instead of pressuring the targeted leadership, give them more politico-social strength by labelling the US as hegemonic or a bully. The case of Cuba during Cold War days is one case in point: the U.S. institutionalised economic coercion via the Embargo Act / Helms-Burton Act to pressure and economically suffocate Castro’s regime, but instead the embargo provided a perpetual political shield, allowing the Cuban government to blame all internal economic failures on the U.S. and ultimately secured the Castro regime’s long-term survival, crushing domestic dissent under the banner of national defence against U.S. imperialism. A similar situation happened with Russia when the U.S. fired institutionalised economic salvos against Putin’s regime during the Russia-Ukraine War to weaken the Russian economy. Still, Russia bypassed restrictions by pivoting its energy exports to alternative markets, and Putin’s approval ratings remained exceptionally high if some reports are to be believed.
Another key example was COMCOM. Though the US officially dissolved COMCOM in 1994, the Coordinating Committee for Multilateral Export Controls (COCOM) was a major instrument used by the US to isolate communist and dictatorial powers economically. Closely examined, COMCOM was a lethal non-kinetic option that acted as an invisible cage, artificially forcing economies into structural stagnation and financial exhaustion while turning Western technology into an absolute monopoly and systematically denying economies access to the global industrial revolution.
The most prominent example is the Soviet Union. The US often used COMCOM to suffocate and stagnate the Soviet economy and technological progress during the Cold War, while keeping the primary aim of coercing states to join the Western-led trade bloc. COMCOM was used akin to kinetic force without actually pushing towards kinetic action against the Soviets when proxy wars and the arms race were at their peak.
However, it was not a complete success. The Soviet Union’s KGB ensured that it used its full might to pierce through the US’s economic onslaught. KGB used laundering networks where Soviets created thousands of front companies in neutral nations like Sweden, Switzerland, and Austria.
They would legally buy advanced Western hardware (such as mainframes or precision tools) and then illegally route it through complex global shipping networks to Moscow. In 1983, Soviet intelligence smuggled a high-powered DEC VAX 11/782 computer, essential for advanced missile and aerospace design, by routing it deceptively through South Africa, West Germany, and Sweden before U.S. authorities could flag it. Similarly, the Soviet Union was deeply integrated into COMECON (the Soviet Bloc’s alternative economic alliance). The Soviet Union effectively subsidised the Cuban economy for decades. Moscow purchased Cuban sugar at up to six times the global market price and supplied the island with virtually free oil.
Institutionalised economic coercion, though, gains legitimacy and sustains its relevance over the long term, but its actual impact on the adversary remains highly debatable. It may deliver initial structural and economic blows to the adversary. Still, it rarely translates into strategic success by causing irreversible damage that could bring down a regime or lead to total politico-economic collapse, at least in modern times.
The Graham Act
A few days ago, U.S. President Donald Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 (H.R. 5334) into law. This sweeping piece of legislation targets Russia’s energy pipeline funding the war in Ukraine and extends the Iran Sanctions Act through 2031. Crucially, the law gives the U.S. President a legal pathway to impose punitive tariffs of up to 100% on the top five global buyers of Russian oil and gas, placing countries like India and China directly under Washington’s economic radar. The lengthy document has three key provisions. First, it authorises tariffs of up to 100% ad valorem on exports to the U.S. from the top five purchasers of Russian crude oil and natural gas. Second, it also targets financial assets for freezing. Third, it mandates property-blocking sanctions on foreign vessels and networks that bypass Western price caps to transport Russian energy.
Another Desperate Attempt
As discussed, these institutionalised attempts to address concerns had little strategic impact on targeted countries. The US’s current adversaries, Russia and Iran, have hardened and built long-term resilience to such salvos from the US. A closer examination shows that such institutional actions quite often stem from strategic desperation when operational coercion fails. The post-Vietnam War period is a clear example: after U.S. kinetic operations failed and troops withdrew in 1973, the U.S. did not simply walk away. The government maintained and expanded a strict institutionalised trade embargo against unified Vietnam under the Trading with the Enemy Act. This economic coercion lasted until 1994, serving as a non-kinetic extension of hostility because military options had failed.
This tariff obsession and sanctions of insanity also hurt US and global supply chains more than the target adversaries. Imposing 100% tariffs on mega-exporters like India and China will cause immediate, massive price hikes for American consumers on electronics, pharmaceuticals, and textiles. According to reports, the US faced economic troubles last year while aggressively engaged in economic coercion and tariff wars, especially targeting India with tariffs. The US stock market crashed, with tariff announcements triggering the worst weekly performance for U.S. equities since 2020. High-profile American mega-cap tech companies (the “Magnificent Seven”) lost over $1.6 trillion in market value. Most notably, the dollar weakened, raising consumer prices and straining the domestic economy, suggesting tariff costs were largely passed on to wholesale and retail buyers and raised everyday prices rather than curbing inflation.
India’s Options
The act has two notable exceptions, namely provisions for waivers and discretionary powers. It also does not automatically impose a 100% tariff on Indian goods, giving India space to manoeuvre and steer clear of the tariff radar. The key exception is “exceptions for nations whose natural gas imports from Russia make up less than 15% of their total mix (provided they are reducing dependence), and crucially grants the U.S. President the power to issue waivers if deemed in the U.S. national interest.”
This key exception can be leveraged by replacing Russian trade with new purchases. India can recalibrate its energy portfolio and diversification strategy by gradually increasing imports from Middle Eastern suppliers and West Africa, reducing Russia’s share to below 15 per cent of the total mix, or temporarily dropping from the top five bracket to avoid exposure to the tariff threat. The Indo-US relationship is advancing and diversifying, underscoring its strategic importance and helping cement India’s position for a waiver, as it did for Chabahar Port during the initial months of the US-Iran war.
Preventive and backchannel diplomacy is key to balancing the Indo-US relationship in this scenario, especially when an ambitious US-India deal is on the horizon. For the US, the tariff-obsessed strategy has costs, straining the relationship with key partners, especially India, which the US often overlooks in its hot pursuit. For India, it offers an opportunity not only to test its energy diplomacy strategies guided by autonomy and diversification but also to test the Indo-US relationship.
