<h2>Executive Summary</h2><ul><li><p>The global trading system faces major challenges, including geopolitical tensions, economic decoupling and disruptions originating in the Covid-19 pandemic.</p></li><li><p>Rising protectionism and increasing tariffs are undermining free trade, with the WTO’s dispute resolution mechanism in disarray.</p></li><li><p>Donald Trump’s leadership philosophies, such as ‘America First’ and transactionalism, will reshape the dynamics of global trade, including for India.</p></li><li><p>India’s growing integration with the global economy presents both opportunities and challenges, including a rising reliance on Chinese supply chains.</p></li><li><p>To secure its future, India must diversify economic partnerships, address structural inefficiencies and focus on high-value services like R&D and marketing.</p></li><li><p>India’s path to becoming a global economic powerhouse will depend on its ability to navigate shifting global trends and align with evolving trade strategies.</p></li></ul>.<p>In recent years, global trade has faced major geopolitical headwinds, including trade wars and economic decoupling, particularly between the US and China. The Covid-19 pandemic disrupted supply chains, exposing vulnerabilities and catalysing localised production. Rising protectionism has led to a spike in tariffs and other restrictions, undermining free trade principles, and today, the WTO’s dispute resolution mechanism lies broken. Technological competition and sanctions have further complicated global trade relations while climate policies and divergent sustainability goals are reshaping trade priorities. Donald Trump’s re-election only adds new complexities to the equation. At a recent India CEO Forum session in Hyderabad, Ambassador Syed Akbaruddin, Founding Dean of the Kautilya School of Public Policy, provided a medium-term outlook for world trade, with a focus on the strategic imperatives for India and businesses operating in the country.</p>.<h2>A Global Overview</h2><p>As the second Trump presidency commences, the global economic landscape presents a mix of stability and uncertainty. The US currently holds a 26% share of world GDP, followed by China and the EU at 17% each, while India accounts for 4%. The US dollar dominates trade finance and foreign reserves, with 85% of trade transactions and over 65% of reserves held in dollars. However, concerns over potential dollar weaponisation have led countries, including India, to explore alternative currency arrangements. Despite these efforts, the dollar’s dominance remains largely unchallenged.</p><p>Global trade is experiencing a slowdown, driven by a sharp rise in trade restrictions, which have surged from around 3,000 in 2009 to nearly 5,000 today. These restrictions, initially focused on goods, are now expanding into services and investment, reflecting broader geopolitical and economic concerns. Sanctions have become a favoured tool of diplomacy, with Russia facing over 21,000 sanctions since the start of the Ukraine conflict, highlighting the growing use of such measures to exert influence.</p><p>The US-China trade relationship is evolving, with the US reducing its imports from China while China shifts its exports to alternative markets such as Mexico and Vietnam. The emergence of ‘connector countries’ (nations that facilitate indirect trade flows) has become a significant factor.</p><p>More broadly, global geopolitics today can be best described by the concept of the ‘Thucydides Trap,’ wherein an established power, like the US, is challenged by a rising power, such as China. Historical patterns suggest that such a competition might escalate tensions globally. In this context, President Trump’s presidency is viewed as a ‘grey rhino’ – a highly visible but underestimated challenge that could reshape the global order in profound ways.</p>.<h2>The Five Philosophies of Donald Trump</h2><p>Mr Trump’s guiding philosophies underpin his policies and define his leadership approach, making him a significant factor in geopolitics. One of his core beliefs is <strong>‘America First,’</strong> which challenges the post-World War II order, in which the US has played the role of global security guarantor. Mr Trump questions why the US should bear disproportionate costs for alliances such as NATO and international institutions like the UN. He insists that other nations must contribute more to their security and economic well-being, signalling a shift from America's historic leadership role to a more insular stance.</p><p>Another cornerstone of Mr Trump’s approach is <strong>transactionalism</strong>. Simply put, he expects direct reciprocity in all international dealings. This philosophy manifests in trade disputes, such as his insistence that countries like India reduce tariffs on American goods or face countermeasures. His handling of issues like the TikTok ban exemplifies his prioritisation of immediate gains over long-term strategic considerations. <strong>Disruption</strong> is another defining feature of Mr Trump’s philosophy. His unconventional statements – such as proposing to buy Greenland, or redefining US-Canada relations – have created uncertainty and forced various global stakeholders to adapt to sudden shifts. His policies often challenge the status quo, creating volatility in economic and geopolitical landscapes.</p><p>Mr Trump's leadership also thrives on <strong>surprises</strong>, making his decision-making highly unpredictable. Whether through unexpected policy announcements or abrupt reversals, this unpredictability complicates planning for businesses and governments alike. Lastly, his <strong>‘Make America Great Again’</strong> agenda focuses on domestic priorities such as tax cuts, deregulation and stricter immigration policies. While these initiatives aim to boost the US economy, they will have far-reaching implications for countries with deep economic ties to the US, including India. All said, these ‘Five Philosophies’ will influence strategy-formulation, compelling India and other nations to recalibrate their policies to align with the United States’ evolving priorities.</p>.<h2>What Does the Future Hold for India?</h2><p>India's growing integration with the world economy presents both opportunities and challenges. In 1990, India's external economic share was 12% of GDP; today, it stands at around 50%. This underscores the rising influence of global trends on Indian businesses and the need for alignment with international norms. While India is projected to become the third largest economy by FY 2030, it remains the poorest in the G20, with a per-capita income of USD 2,800 compared to the US at USD 80,000 and China at USD 18,000.</p><p>Achieving the goal of a ‘Viksit Bharat’ by 2047 requires India to increase its GDP ninefold and per-capita income eightfold. The World Bank suggests that this could take anywhere from 22 to 42 years, depending on factors such as human capital investment, female workforce participation and private sector growth. However, India's path to growth faces unique challenges. Unlike China's relatively stable economic rise, India must navigate a volatile global environment.</p><p>China's dominance in global supply chains, especially in critical sectors like semiconductors and EVs, presents a dilemma. While India relies heavily on Chinese imports, geopolitical tensions complicate this dependence. The challenge is to strike a balance: diversifying economic partnerships while maintaining strategic autonomy. India is actively exploring alternatives through partnerships with BRICS, QUAD, and other global alliances to hedge against over-dependence.</p><p>To capitalise on shifting global trade dynamics, India must address structural inefficiencies such as high tariffs and regulatory costs that hinder competitiveness. Experts suggest expanding the focus of policy beyond manufacturing to high-value services like R&D, design and marketing, areas where India has a competitive edge. Additionally, engaging with the EU, a key player in global trade, could open new economic opportunities.</p><p>Ultimately, India's economic strategy will depend on its perception of global trends – whether it views the world as stable, turbulent or unpredictable will shape its policies. Navigating these complexities will be crucial to India's aspirations of becoming a global economic powerhouse.</p>
<h2>Executive Summary</h2><ul><li><p>The global trading system faces major challenges, including geopolitical tensions, economic decoupling and disruptions originating in the Covid-19 pandemic.</p></li><li><p>Rising protectionism and increasing tariffs are undermining free trade, with the WTO’s dispute resolution mechanism in disarray.</p></li><li><p>Donald Trump’s leadership philosophies, such as ‘America First’ and transactionalism, will reshape the dynamics of global trade, including for India.</p></li><li><p>India’s growing integration with the global economy presents both opportunities and challenges, including a rising reliance on Chinese supply chains.</p></li><li><p>To secure its future, India must diversify economic partnerships, address structural inefficiencies and focus on high-value services like R&D and marketing.</p></li><li><p>India’s path to becoming a global economic powerhouse will depend on its ability to navigate shifting global trends and align with evolving trade strategies.</p></li></ul>.<p>In recent years, global trade has faced major geopolitical headwinds, including trade wars and economic decoupling, particularly between the US and China. The Covid-19 pandemic disrupted supply chains, exposing vulnerabilities and catalysing localised production. Rising protectionism has led to a spike in tariffs and other restrictions, undermining free trade principles, and today, the WTO’s dispute resolution mechanism lies broken. Technological competition and sanctions have further complicated global trade relations while climate policies and divergent sustainability goals are reshaping trade priorities. Donald Trump’s re-election only adds new complexities to the equation. At a recent India CEO Forum session in Hyderabad, Ambassador Syed Akbaruddin, Founding Dean of the Kautilya School of Public Policy, provided a medium-term outlook for world trade, with a focus on the strategic imperatives for India and businesses operating in the country.</p>.<h2>A Global Overview</h2><p>As the second Trump presidency commences, the global economic landscape presents a mix of stability and uncertainty. The US currently holds a 26% share of world GDP, followed by China and the EU at 17% each, while India accounts for 4%. The US dollar dominates trade finance and foreign reserves, with 85% of trade transactions and over 65% of reserves held in dollars. However, concerns over potential dollar weaponisation have led countries, including India, to explore alternative currency arrangements. Despite these efforts, the dollar’s dominance remains largely unchallenged.</p><p>Global trade is experiencing a slowdown, driven by a sharp rise in trade restrictions, which have surged from around 3,000 in 2009 to nearly 5,000 today. These restrictions, initially focused on goods, are now expanding into services and investment, reflecting broader geopolitical and economic concerns. Sanctions have become a favoured tool of diplomacy, with Russia facing over 21,000 sanctions since the start of the Ukraine conflict, highlighting the growing use of such measures to exert influence.</p><p>The US-China trade relationship is evolving, with the US reducing its imports from China while China shifts its exports to alternative markets such as Mexico and Vietnam. The emergence of ‘connector countries’ (nations that facilitate indirect trade flows) has become a significant factor.</p><p>More broadly, global geopolitics today can be best described by the concept of the ‘Thucydides Trap,’ wherein an established power, like the US, is challenged by a rising power, such as China. Historical patterns suggest that such a competition might escalate tensions globally. In this context, President Trump’s presidency is viewed as a ‘grey rhino’ – a highly visible but underestimated challenge that could reshape the global order in profound ways.</p>.<h2>The Five Philosophies of Donald Trump</h2><p>Mr Trump’s guiding philosophies underpin his policies and define his leadership approach, making him a significant factor in geopolitics. One of his core beliefs is <strong>‘America First,’</strong> which challenges the post-World War II order, in which the US has played the role of global security guarantor. Mr Trump questions why the US should bear disproportionate costs for alliances such as NATO and international institutions like the UN. He insists that other nations must contribute more to their security and economic well-being, signalling a shift from America's historic leadership role to a more insular stance.</p><p>Another cornerstone of Mr Trump’s approach is <strong>transactionalism</strong>. Simply put, he expects direct reciprocity in all international dealings. This philosophy manifests in trade disputes, such as his insistence that countries like India reduce tariffs on American goods or face countermeasures. His handling of issues like the TikTok ban exemplifies his prioritisation of immediate gains over long-term strategic considerations. <strong>Disruption</strong> is another defining feature of Mr Trump’s philosophy. His unconventional statements – such as proposing to buy Greenland, or redefining US-Canada relations – have created uncertainty and forced various global stakeholders to adapt to sudden shifts. His policies often challenge the status quo, creating volatility in economic and geopolitical landscapes.</p><p>Mr Trump's leadership also thrives on <strong>surprises</strong>, making his decision-making highly unpredictable. Whether through unexpected policy announcements or abrupt reversals, this unpredictability complicates planning for businesses and governments alike. Lastly, his <strong>‘Make America Great Again’</strong> agenda focuses on domestic priorities such as tax cuts, deregulation and stricter immigration policies. While these initiatives aim to boost the US economy, they will have far-reaching implications for countries with deep economic ties to the US, including India. All said, these ‘Five Philosophies’ will influence strategy-formulation, compelling India and other nations to recalibrate their policies to align with the United States’ evolving priorities.</p>.<h2>What Does the Future Hold for India?</h2><p>India's growing integration with the world economy presents both opportunities and challenges. In 1990, India's external economic share was 12% of GDP; today, it stands at around 50%. This underscores the rising influence of global trends on Indian businesses and the need for alignment with international norms. While India is projected to become the third largest economy by FY 2030, it remains the poorest in the G20, with a per-capita income of USD 2,800 compared to the US at USD 80,000 and China at USD 18,000.</p><p>Achieving the goal of a ‘Viksit Bharat’ by 2047 requires India to increase its GDP ninefold and per-capita income eightfold. The World Bank suggests that this could take anywhere from 22 to 42 years, depending on factors such as human capital investment, female workforce participation and private sector growth. However, India's path to growth faces unique challenges. Unlike China's relatively stable economic rise, India must navigate a volatile global environment.</p><p>China's dominance in global supply chains, especially in critical sectors like semiconductors and EVs, presents a dilemma. While India relies heavily on Chinese imports, geopolitical tensions complicate this dependence. The challenge is to strike a balance: diversifying economic partnerships while maintaining strategic autonomy. India is actively exploring alternatives through partnerships with BRICS, QUAD, and other global alliances to hedge against over-dependence.</p><p>To capitalise on shifting global trade dynamics, India must address structural inefficiencies such as high tariffs and regulatory costs that hinder competitiveness. Experts suggest expanding the focus of policy beyond manufacturing to high-value services like R&D, design and marketing, areas where India has a competitive edge. Additionally, engaging with the EU, a key player in global trade, could open new economic opportunities.</p><p>Ultimately, India's economic strategy will depend on its perception of global trends – whether it views the world as stable, turbulent or unpredictable will shape its policies. Navigating these complexities will be crucial to India's aspirations of becoming a global economic powerhouse.</p>
