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Donald Trump's imposition of sweeping tariffs on imports sent shockwaves through the global economy, challenging the post-World War II order and creating both anxiety and potential opportunities for nations worldwide. The tariffs, exceeding even the expectations of Trump's business allies, triggered negative market reactions and prompted the US Federal Reserve to reconsider interest rate cuts due to inflationary concerns. Comparisons to the Great Depression underscored the severity of the situation. While most countries hesitated to retaliate immediately, China responded with reciprocal tariffs, primarily aimed at inflicting political pain on Trump by targeting his support base in the US agricultural sector. The European Union exhibited internal divisions, with the European Commission advocating retaliation while key member states like Germany and France favored a more cautious approach involving negotiations to de-escalate the situation. Canada and Mexico, already subject to specific tariffs on steel and aluminum, were exempted from the broader tariffs due to the complexities arising from the integrated supply chains established under the USMCA trade agreement. The Prime Minister of Singapore expressed a pessimistic view, suggesting the end of the current global order and emphasizing the need for smaller nations to prepare for a future where trade agreements are negotiated bilaterally, diminishing their bargaining power. This shift away from multilateralism, driven by imbalances stemming from China's exploitation of WTO provisions, concentrates a significant portion of global manufacturing in China through subsidies and forced technology transfers. The article suggests that continued policy unpredictability from the US can be expected as it assesses the impact of these measures on its domestic political and economic landscape. Despite divisions among political parties and businesses, and growing societal polarization, Trump's core support base remains loyal, limiting effective opposition from within the Republican party. With Republicans controlling both houses of Congress, the traditional system of checks and balances is weakened, and radical right-wing figures exert undue influence on policy decisions and personnel appointments.
India faces a critical juncture in navigating this turbulent global trade environment. The US is India's largest trading partner, with a substantial trade surplus in India's favor. Historically, countries like China, South Korea, Japan, and many European nations benefited from access to the US market. However, given the current political climate in the US, this opportunity is no longer readily available. The article argues that it is crucial for India to pursue a bilateral, multi-sectoral free trade agreement (FTA) with the US to circumvent the new tariffs and gain a competitive edge over other nations. The high tariff rates imposed on China (54%) and Vietnam (42%) present a potential advantage for India, which faces a comparatively lower tariff rate of 26%. Following the Indian Prime Minister's meeting with Trump, both countries committed to working towards a trade agreement, with the initial phase to be completed by the fall of this year. Negotiations have commenced, signaling a positive step towards closer economic ties. If the first phase of the trade agreement is successfully concluded, a visit by Trump to India for a Quad Summit is anticipated, potentially further fostering cooperation between the two nations. The article then transitions to discussing the Initiative on Critical and Emerging Technologies (iCET) launched between the US and India during the Biden administration. This initiative aimed to deepen cooperation in areas such as AI, quantum technology, cyberspace, 6G, biotechnology, semiconductors, defense, and space, focusing on co-development, production-sharing, and sectoral trade facilitation. Despite the change in administration, the Trump administration has retained the core essence of iCET, rebranding it as ‘TRUST' (Transforming the Relationship Using Strategic Technologies). This continuity suggests significant potential for deepening technology partnerships, creating mutually beneficial opportunities, and promoting sector-focused trade between the two countries.
The latest US tariffs and trade policies are causing considerable disruption, yet the US remains committed to its position as a leading global economic and technology power. While the US has taken action against numerous countries, including its allies and partners, it views China as its primary economic, technological, and military rival, perceiving China as aiming to displace the US in the international system. US policymakers and businesses acknowledge the need for a strong partnership with India, leveraging its large population and skilled workforce, to effectively counter the China challenge. This strategic imperative presents a unique opportunity for India to strengthen its ties with the US. Despite the uncertainty and upheaval resulting from the new trade landscape, the underlying geopolitical dynamics offer India leverage. The US sees India as a crucial partner in containing China's rise and maintaining its own global influence. Therefore, even amidst the challenges posed by the tariffs, India can capitalize on this strategic alignment to negotiate favorable trade deals, enhance technology cooperation, and strengthen its position on the global stage. By focusing on strategic partnerships, technological advancement, and proactive engagement in trade negotiations, India can navigate the complexities of the evolving global order and emerge as a key player in the reshaping of international economic relations. The author's perspective, as a former Indian ambassador, lends further weight to the analysis, underscoring the importance of understanding the nuances of US foreign policy and the opportunities available for India to advance its interests in the current geopolitical climate. India can use these conditions to solidify a new future that positions itself to have economic prosperity and security for years to come. The shift in global alignment makes for a change to be handled with strategic choices and calculated risks.
Source: Opinion | India Has A Rare Opportunity In Trump Tariffs