India & The New World

Facing Global War with Bilateralism

13 April, 2025

Deepak Razdan

As the New World continued to churn after US President Donald Trump’s unilateral announcement of stiff import tariffs, his subsequent pauses and a steep penalty for China’s reciprocal tariffs, it was almost clear the US President was articulating for his country virtually the same pain and suffering that Ukraine President Volodymyr Zelenskyy was speaking about for his nation.

The Ukraine President was seeking world attention to his country’s plight after Russia brutally captured parts of its eastern territory, bombed its urban infrastructure and buildings, and caused loss of innocent lives.

President Trump has similarly sought the world’s recognition that China has captured vast parts of its market, taking advantage of its low tariffs and inability to act against theft of intellectual property. The world made huge trade profits while the US kept quiet, respecting multilateral laws and conventions, he said.

If Ukraine lost territory and suffered bloodshed on its border under Russian attacks, Mr Trump is pointing out that China, as well as many other small and developed economies, had drained the US of vital economic blood, without even making a whimper, in the name of free trade. Certainly, the US could not let things go on like this.

Disclosing how China was earning billions of US dollars in its trade with the US, and made use of the money to build a stronger army, Mr Trump said the low US tariffs had brought the country to such a bad shape that it can’t even make sufficient antibiotics for its sick.

The US was importing all of its computers, phones, televisions and electronics. A single shipyard in China produced more ships every year than all the shipyards in the US combined, he said. Announcing his government’s intent to fight back, he said, “We are going to build all of them.”

Mr Trump said the tariffs were needed to rectify the situation and to stop the nation moving towards a “collapse.” He argued that “we can’t be kind when we are cheated.” The tariffs could have been higher, he said, if he had only matched the high tariffs which most countries imposed on the US goods, but he restrained himself, as that would have made things difficult for some people.

Mr Zelenskyy’s plea for support has been answered by the United Kingdom-led Coalition of the Willing comprising the European Union nations including Germany and France, pledging substantial financial help to rebuild Ukraine’s defence systems.

Mr Trump’s determination to continue the tariffs has evoked response from over 75 nations wanting to sort out the issue and offering to substantially lower their tariffs for US goods. This great churn in international relations has a few lessons for India.

As nations across the globe searched for solutions, there were suggestions for trade groupings away from the US. There was widespread caution and anger on how to respond to the “illogical” US tariffs. China went solo and matched 34 per cent against it with its 34 per cent against the US, which quickly raised it by another 50 per cent.

As the numbers game caught up, the US settled at 145 per cent against 125 per cent of the Chinese. This made the plot clear. It is US versus China. The US President put on pause the additional slabs of tariffs for the whole world for 90 days, leaving out China and a few other nations like Canada which had announced their reciprocal tariffs for the US.

On 12th April, the US has withdrawn its reciprocal tariffs on a large range of electronic goods like smartphones, laptops, computer processors, chips, semiconductor devices, hard drives and some other electronic items.

The European Union Trade Ministers had also approved EU’s 25 per cent against the US, but withheld the announcement in response to the pause declared by Mr Trump. French President Emmanuel Macron remarked the pause was not meaningful as 25 per cent tariff on steel, aluminium and autos continued along with the base 10 per cent tariff.

The White House explained the pause was necessary as more than 75 countries had approached the US administration for talks and to settle the issue. The US had received indications that most countries wanted to substantially reduce their levies against the US goods.  

Adjusting to the New World realities, India has to realize that globalization is good, but one must not stop looking inwards and around the neighbourhood. India has a large domestic economy which can keep the wheels of production and consumption going. Globalisation brings advantages of cheaper and quality goods delivered at your ports by countries which have mastered the innovations.

The only worry here is that there should be no disruption in supply chains. Globalisation brings addictive interdependence. People to people contacts grow stronger, until there is entry of politics.

India will realize that it will be better to diversify the direction of its trade. Every small country matters as much as a developed nation. The value of bilateral trade agreements was not underestimated even at the peak of multilateralism, but when WTO is forgotten and multi-nation organisations built decades earlier are being rejected, the free trade agreements (FTAs) and bilateral trade agreements (BTAs) become essential.

The Indian government has been working on Trade Agreements which are helpful during uncertain conditions in global economic engagement.

Currently, India is engaged in three particularly important negotiations -- Free Trade Agreements (FTAs) with the European Union and the United Kingdom and a Bilateral Trade Agreement (BTA) with the United States. India’s BAT with the US is in advanced stage of talks and efforts are that its first tranche be announced by the coming fall.

Commerce and Industry Minister Piyush Goyal assured exporters recently that the Indian team for talks with the US is exploring the right mix and the right balance. There will be speed but not undue haste to ensure the right outcome for the country. Negotiations have been launched with New Zealand also for a free trade agreement.

Mr Goyal said the current situation was difficult, but it offered some opportunities also to India. There is a potential for increase in manufacturing, creation of additional jobs, as India can attract big players in global supply chain. India has established itself as a trusted and reliable partner and a predictable business-friendly destination.

The Commerce and Industry Minister complimented Indian exporters and industry for achieving India’s highest ever exports of above US dollars 820 billion during 2024-25.

This showed a six per cent growth over the previous fiscal year, in spite of multiple headwinds including the Red Sea crisis, Israel-Hamas conflict spilling over to Gulf region, the Russia-Ukraine conflict and slow growth in some developed economies. Trade with new partners will give hope to all sections of the Indian society, despite a difficult world environment.