In No Clear Terms

(Source: The Indian Express, Editorial Page)

Also Read: The Indian Express Editorial Analysis: 10 July 2025
Also Read: The Hindu Editorial Analysis: 10 July 2025

Topic: GS2 – International Relations, GS3 – Indian Economy (External Sector)

Context

The editorial delves into the unpredictable and unilateral trade measures being revived by Donald Trump, particularly through sudden tariff hikes and bilateral pressure tactics. His decision to reintroduce tariffs disrupts existing global trade patterns, threatens multilateralism, and poses significant risks for developing economies like India. For UPSC aspirants, this is a critical case to understand how geopolitics intersects with global economics and India’s trade diplomacy.

Trump’s Disruptive Trade Playbook

• Unilateral Tariff Reinstatement: Trump’s decision to reinstate tariffs on 14 countries from August 2025—covering key goods like steel, aluminum, and tech components—reflects a shift from cooperative trade norms to coercive, interest-first policies.
• Bilateralism over Multilateralism: His preference for bilateral deals over WTO-led frameworks weakens global trade institutions. This undermines consensus-based trade governance, a key principle of the WTO.
• Short-termism and Instability: Sudden and poorly communicated trade actions have generated panic among trading partners, affecting investor confidence, long-term trade deals, and cross-border supply chains.

Global Trade Order Under Stress

• Allied Nations Also Targeted: Even strategic allies like Japan and South Korea have been hit by U.S. tariffs, signaling that economic nationalism is being prioritized over alliances or regional pacts.
• WTO Marginalized: By bypassing multilateral mechanisms for dispute resolution, the U.S. undermines the credibility of the WTO. The ripple effect weakens the dispute redressal and negotiation architecture globally.
• Disruption of Global Supply Chains: Sudden tariff changes affect intermediate goods in global value chains (GVCs), particularly in electronics, automotive, and industrial goods.

Implications for Developing Countries

• Export Volatility: Emerging economies face sharp increases in export duties—ranging from 25% to 40%—which affects profitability and long-term contract viability. For example, countries in ASEAN and Latin America now face renegotiation of trade access.
• India’s Trade Diversification Need: With the U.S. becoming unreliable, India must reduce overdependence and explore newer markets in Africa, Central Asia, and Latin America.
• Stifled Manufacturing Growth: Domestic exporters reliant on U.S. markets are facing declining orders, which directly affects employment and investment in export-heavy sectors like electronics and auto components.

Geopolitical Fallout and China’s Position

• Blame on Transshipment via ASEAN: Trump’s tariffs seem aimed at Chinese goods rerouted through third countries like Vietnam or Malaysia. This puts Southeast Asia in a difficult position geopolitically.
• India’s Strategic Dilemma: India, a regional power in the Indo-Pacific, must now navigate between trade realignments and strategic autonomy in the face of U.S.–China economic conflict.
• Regional Bloc Tensions: These developments threaten the cohesion of trade blocs like RCEP and raise questions on India’s stance in the Indo-Pacific Economic Framework (IPEF).

Erosion of Multilateral Trade Governance

• WTO and FTAs Weakened: Institutions that once underpinned global trade are now viewed as ineffective, with leading powers openly defying rules. The Global Trade and Research Initiative warns that this could dismantle the very framework of global trade.
• India’s Call for WTO Reform: India must press for reform of multilateral institutions, ensuring that they reflect the needs of developing economies and are protected from unilateral dominance.

Key Dimensions of Trump’s Trade Policy Impact

Key Area	Impact on Global Trade	Relevance for India
Tariff Policy	Sudden, unilateral, and non-consensual	Export volatility and contract uncertainty
Multilateralism	Weakening of WTO and FTAs	Need to push for rule-based reforms
Bilateral Focus	Prioritization of one-on-one deals	Risk of coercive diplomacy
Global Value Chains (GVCs)	Fragmentation and increased trade costs	Disruption in intermediate goods exports
Indo-Pacific Strategy	Heightened U.S.–China rivalry	Strategic trade balancing for India

Conclusion

• Trump’s tariff-centric trade revival signals a major shift away from institutional norms. For India, this necessitates proactive trade diplomacy.

• Strengthening regional alliances like BIMSTEC, deepening engagement with African and Latin American markets, and enhancing resilience in manufacturing are crucial.

• Additionally, India must lead in pushing for WTO reform and establishing trade norms that protect developing economies from unpredictable global power plays.

Practice Question: (GS-3 | 15 Marks | 250 Words) The resurgence of unilateralism in global trade, as seen in recent U.S. tariff actions, threatens multilateral economic institutions. Discuss its implications for India’s export economy and suggest a strategic roadmap for India to safeguard its trade interests.