<h2>Executive Summary </h2><ul><li><p>The global trading system is fragmenting under the combined weight of America’s domestic politics, rising protectionism across the globe, and weakened multilateral institutions. </p></li><li><p>The collapse of the WTO dispute mechanism is driving a pivot to bilateral trade deals.</p></li><li><p>China faces slowing growth and high unemployment but remains central to global supply chains. </p></li><li><p>For India, this disorder presents both risks and opportunities: navigating agricultural trade standoffs with the US, deepening ties with the Gulf and recalibrating relations with China. </p></li><li><p>With 70% of its trade by value and 90% by volume transported via sea, India must rapidly accelerate naval expansion to safeguard its maritime trade routes.</p></li></ul>.<p>A breakdown in US domestic politics is accelerating the ongoing shift in the global order. Mr Trump continues to champion the MAGA ideology, which remains deeply rooted in his core voter base of lower middle-class Americans, whose incomes have eroded, whose political and social influence is diminishing and who are increasingly turning inwards. His approach is unilateral and extreme: allies are treated as adversaries until they conform to his agenda, and trade deals are framed as short-term wins rather than strategic investments. At a recent joint session of the India CEO, CFO and CHRO Forums in Delhi NCR, Pramit Pal Chaudhuri, South Asia Practice Head at Eurasia Group, Fellow at the Ananta Aspen Centre and Editor of the Quad+ journal, unpacked the strategic undercurrents behind America’s tariff moves and explored their broader implications for India’s trade and foreign policy calculus.</p><h2>A Study in Contrasts</h2><p>Joe Biden’s tenure, characterised by coalition-building with partners like India, stands in sharp contrast to Mr Trump’s preference for bilateral deals executed through executive orders. For Mr Trump, tariffs serve less as diplomatic tools than as instruments of domestic politics, designed to generate tax revenues and protect jobs for his core voter base. However, the cost of tariffs is not borne by foreign exporters alone: in the longer term, companies may only absorb a part of it, and pass the rest on to consumers. The US-China trade war has pushed agriculture and soya to the centre of US-India negotiations, as China (formerly the largest buyer of US soya) has cut purchases. While India has conceded on corn and soybean oil, dairy and soya remain red lines driven by domestic politics on both sides.</p><h2>Bilateralism over Multilateralism</h2><p>The collapse of the WTO’s appellate body has left countries scrambling for bilateral FTAs to protect market access. The EU now seems willing to drop its non-trade clauses on gender and climate to accelerate deals. India, meanwhile, has finalised an FTA with the UK and is pursuing agreements with the EU, Japan and the Gulf states even as it sequences contentious issues like digital regulation to later phases. Globally, supply chains are ‘glocalising’ by shortening, building in resilience to guard against disruptions and absorbing higher costs to reduce geopolitical exposure. This shift presents manufacturing opportunities in electronics, textiles, aerospace and defence for India, provided regulatory and infrastructure bottlenecks are addressed.</p><h2>Regional and Strategic Realignments</h2><p>India’s China policy is cautiously transactional, maintaining border readiness while selectively resuming visas, tourism and controlled investments. Russia, meanwhile, remains a key energy partner for India but the savings from its discounted crude oil, especially as global oil prices moderate, are smaller than is generally believed. Alternative sources, such as Saudi Arabia, Iraq and Nigeria are readily available as pressure from the White House continues to ratchet up. At the same time, defence imports from Russia are steadily declining, primarily over fears of heavy Chinese component integration.</p><p>India’s strategy towards Pakistan is one of sustained economic pressure, demonstrated by its suspension of the Indus Water Treaty in the backdrop of Operation Sindoor. With regard to Bangladesh, the BNP seeks India’s support against both the Jamaat and Chief Advisor Muhammad Yunus, whose government is perceived as anti-India. Meanwhile, a US-Bangladesh FTA reportedly includes stringent national security measures and restrictions on Chinese arms. Finally, turning to the Gulf countries, the UAE continues to implement the USD 50 billion investment commitment it made to India in 2015, though flows from Saudi have slowed amid the Gaza war. The Israel leg of a planned trilateral investment programme has been paused for the same reason.</p><h2>Security, Technology and Naval Imperatives</h2><p>India’s security posture is evolving under budgetary constraints. While growing in absolute terms, defence spending has fallen from 3.1% of GDP in 2009 to 2.4% today. Recent conflicts with China and Pakistan have exposed vulnerabilities, including cruise missile shortages and a dependence on outdated computing infrastructure, highlighting the need for private sector intervention. Equally, with 70% of India’s trade by value and 90% by volume transported via sea, India will necessarily have to bolster its standing as a naval power. The Navy now spends over 320 days a year safeguarding shipping lanes supported by its largest-ever fleet expansion. Simultaneously, the Quad is emerging as a platform for strategic technology cooperation with AI, quantum computing and green hydrogen, reflecting the broader US-China rivalry in critical sectors.</p><h2>Currency Dynamics and Dollar Dominance</h2><p>The US dollar retains its dominance despite renewed talk of de-dollarisation. While its overvaluation undermines the competitiveness of US manufacturing, viable alternatives are limited: gold reserves are finite; the rupee and renminbi lack full convertibility; and surplus rupee holdings (e.g. the equivalent of USD 125 billion in Russia’s case) are often unusable due to limited reciprocity around trade flows. Moreover, unless the underlying settlement challenges are resolved, moving away from the dollar risks fragmenting global trade into regional blocs.</p><h2>Navigating Volatility with Strategic Agility</h2><p>The decade ahead will be defined by sharper geopolitical swings, weakened institutional guardrails and rising systemic costs. For India, this environment demands agility in trade negotiations, resilience in supply chain planning and clarity in strategic partnerships. Navigating this uncertainty will require leveraging targeted alliances, securing critical maritime and technological capacities and treating economic diplomacy as a dynamic, evolving instrument of statecraft. Volatility may now define the global landscape, but it also creates opportunity for India to influence outcomes provided it can respond with speed, precision and strategic foresight.</p>
<h2>Executive Summary </h2><ul><li><p>The global trading system is fragmenting under the combined weight of America’s domestic politics, rising protectionism across the globe, and weakened multilateral institutions. </p></li><li><p>The collapse of the WTO dispute mechanism is driving a pivot to bilateral trade deals.</p></li><li><p>China faces slowing growth and high unemployment but remains central to global supply chains. </p></li><li><p>For India, this disorder presents both risks and opportunities: navigating agricultural trade standoffs with the US, deepening ties with the Gulf and recalibrating relations with China. </p></li><li><p>With 70% of its trade by value and 90% by volume transported via sea, India must rapidly accelerate naval expansion to safeguard its maritime trade routes.</p></li></ul>.<p>A breakdown in US domestic politics is accelerating the ongoing shift in the global order. Mr Trump continues to champion the MAGA ideology, which remains deeply rooted in his core voter base of lower middle-class Americans, whose incomes have eroded, whose political and social influence is diminishing and who are increasingly turning inwards. His approach is unilateral and extreme: allies are treated as adversaries until they conform to his agenda, and trade deals are framed as short-term wins rather than strategic investments. At a recent joint session of the India CEO, CFO and CHRO Forums in Delhi NCR, Pramit Pal Chaudhuri, South Asia Practice Head at Eurasia Group, Fellow at the Ananta Aspen Centre and Editor of the Quad+ journal, unpacked the strategic undercurrents behind America’s tariff moves and explored their broader implications for India’s trade and foreign policy calculus.</p><h2>A Study in Contrasts</h2><p>Joe Biden’s tenure, characterised by coalition-building with partners like India, stands in sharp contrast to Mr Trump’s preference for bilateral deals executed through executive orders. For Mr Trump, tariffs serve less as diplomatic tools than as instruments of domestic politics, designed to generate tax revenues and protect jobs for his core voter base. However, the cost of tariffs is not borne by foreign exporters alone: in the longer term, companies may only absorb a part of it, and pass the rest on to consumers. The US-China trade war has pushed agriculture and soya to the centre of US-India negotiations, as China (formerly the largest buyer of US soya) has cut purchases. While India has conceded on corn and soybean oil, dairy and soya remain red lines driven by domestic politics on both sides.</p><h2>Bilateralism over Multilateralism</h2><p>The collapse of the WTO’s appellate body has left countries scrambling for bilateral FTAs to protect market access. The EU now seems willing to drop its non-trade clauses on gender and climate to accelerate deals. India, meanwhile, has finalised an FTA with the UK and is pursuing agreements with the EU, Japan and the Gulf states even as it sequences contentious issues like digital regulation to later phases. Globally, supply chains are ‘glocalising’ by shortening, building in resilience to guard against disruptions and absorbing higher costs to reduce geopolitical exposure. This shift presents manufacturing opportunities in electronics, textiles, aerospace and defence for India, provided regulatory and infrastructure bottlenecks are addressed.</p><h2>Regional and Strategic Realignments</h2><p>India’s China policy is cautiously transactional, maintaining border readiness while selectively resuming visas, tourism and controlled investments. Russia, meanwhile, remains a key energy partner for India but the savings from its discounted crude oil, especially as global oil prices moderate, are smaller than is generally believed. Alternative sources, such as Saudi Arabia, Iraq and Nigeria are readily available as pressure from the White House continues to ratchet up. At the same time, defence imports from Russia are steadily declining, primarily over fears of heavy Chinese component integration.</p><p>India’s strategy towards Pakistan is one of sustained economic pressure, demonstrated by its suspension of the Indus Water Treaty in the backdrop of Operation Sindoor. With regard to Bangladesh, the BNP seeks India’s support against both the Jamaat and Chief Advisor Muhammad Yunus, whose government is perceived as anti-India. Meanwhile, a US-Bangladesh FTA reportedly includes stringent national security measures and restrictions on Chinese arms. Finally, turning to the Gulf countries, the UAE continues to implement the USD 50 billion investment commitment it made to India in 2015, though flows from Saudi have slowed amid the Gaza war. The Israel leg of a planned trilateral investment programme has been paused for the same reason.</p><h2>Security, Technology and Naval Imperatives</h2><p>India’s security posture is evolving under budgetary constraints. While growing in absolute terms, defence spending has fallen from 3.1% of GDP in 2009 to 2.4% today. Recent conflicts with China and Pakistan have exposed vulnerabilities, including cruise missile shortages and a dependence on outdated computing infrastructure, highlighting the need for private sector intervention. Equally, with 70% of India’s trade by value and 90% by volume transported via sea, India will necessarily have to bolster its standing as a naval power. The Navy now spends over 320 days a year safeguarding shipping lanes supported by its largest-ever fleet expansion. Simultaneously, the Quad is emerging as a platform for strategic technology cooperation with AI, quantum computing and green hydrogen, reflecting the broader US-China rivalry in critical sectors.</p><h2>Currency Dynamics and Dollar Dominance</h2><p>The US dollar retains its dominance despite renewed talk of de-dollarisation. While its overvaluation undermines the competitiveness of US manufacturing, viable alternatives are limited: gold reserves are finite; the rupee and renminbi lack full convertibility; and surplus rupee holdings (e.g. the equivalent of USD 125 billion in Russia’s case) are often unusable due to limited reciprocity around trade flows. Moreover, unless the underlying settlement challenges are resolved, moving away from the dollar risks fragmenting global trade into regional blocs.</p><h2>Navigating Volatility with Strategic Agility</h2><p>The decade ahead will be defined by sharper geopolitical swings, weakened institutional guardrails and rising systemic costs. For India, this environment demands agility in trade negotiations, resilience in supply chain planning and clarity in strategic partnerships. Navigating this uncertainty will require leveraging targeted alliances, securing critical maritime and technological capacities and treating economic diplomacy as a dynamic, evolving instrument of statecraft. Volatility may now define the global landscape, but it also creates opportunity for India to influence outcomes provided it can respond with speed, precision and strategic foresight.</p>
