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By April 2025, the global trade order stands at its most volatile moment in decades. Triggered by the Trump administration’s tariff escalation, the world’s leading economies—China, the European Union, and the United States—are now embroiled in a tariff war of historic scale. Yet, amid this turbulence, a new player is emerging with quiet force and strategic calculation: India.
It began with a bang. In March, Washington imposed 104% reciprocal tariffs on Chinese imports. This was followed swiftly by a 25% blanket tariff on European steel and aluminium and a 26% effective tariff on Indian goods.
China’s response was equally resolute: 84% counter-tariffs, sweeping export controls on critical minerals, and a sell-off of $120 billion in U.S. Treasuries.
The European Union, meanwhile, launched its own 25% retaliatory tariffs on American exports and is racing to implement the Critical Raw Materials Act. Together, these policy volleys represent a dramatic recalibration of the global economic architecture. The costs are adding up quickly.
According to the WTO, U.S.-China trade dropped 18% year-on-year in the first quarter.
Drewry Shipping reports that global container volumes are down 7%. Inflation has ticked upward, with the U.S.
Consumer Price Index at 3.6% and Eurozone inflation at 2.9%.
And now, J.P. Morgan has raised the probability of a global recession to 40%, citing trade uncertainty as a primary factor.
Markets are reeling. Global firms are rethinking supply chains. But not everyone is on the defensive.
As advanced economies scramble, India is advancing. Rather than retaliate, India has responded with strategy. While absorbing a 26% tariff from the U.
S., it has avoided confrontation, choosing instead to accelerate trade negotiations with the United Kingdom, Gulf Cooperation Council countries, and the European Free Trade Association. It has opened the door for supply chain realignment through production-linked incentives and is seeing real results: a 15% surge in FDI and high-profile manufacturing shifts like Apple reallocating 18% of its production from China to India and Vietnam.
This calm persistence stands in sharp contrast to the turbulence elsewhere. The European Union’s tariff package—though proportionate—exposed internal divisions, with countries lobbying to shield their preferred industries. China, meanwhile, has weaponised critical minerals like tungsten, tellurium, and molybdenum and added U.
S. firms to its Unreliable Entities List. The U.
S., for its part, paused tariffs on most countries for 90 days, isolating China with a punitive 125% rate. But the uncertainty has already done damage, pushing business sentiment down and distorting investment flows.
Beneath all this lies a deeper question: What role does the U.S. dollar play in this evolving conflict? As the dominant reserve currency, it is both a shield and a sword for Washington.
A weakening dollar—now hovering around a DXY index of 104.5—can make U.S.
exports more competitive and dull the bite of Chinese retaliation. But it also risks undermining long-term confidence in the currency’s stability. China’s moves—selling Treasuries, depreciating the yuan (down 6.
5% year-to-date)—suggest this dynamic is now firmly in play. And yet, the most compelling story may not be about the combatants. It may be about the country navigating the middle: India.
By pursuing FTAs instead of trade wars and by positioning itself as a neutral, rules-abiding partner, India is fast becoming the preferred node in a world that no longer trusts any single economic power to dominate supply chains. India’s trajectory is neither accidental nor passive. Its ongoing economic diplomacy—most notably, renewed FTA talks with the UK, expanded ties with the UAE, and CEPA arrangements with EFTA—are positioning it to benefit from trade diversion.
Meanwhile, its refusal to pick sides in the U.S.–China rivalry reinforces its non-aligned, strategic autonomy.
The numbers reflect this shift. While the major powers see declining trade flows, India’s exports to the UAE grew 11% last year. FDI flows into India are up 15%.
And with advanced economies looking for resilient, democratic partners to anchor global production, India’s steady approach is paying dividends. None of this means India is immune. Pharmaceutical exports, long a key component of India’s trade with the U.
S., are under review. The Trump administration may soon slap a 10% tariff on generic imports—ostensibly to promote domestic manufacturing.
But even here, India is preparing with contingency policies to support its Pharma exporters and expand access in emerging markets. What lies ahead? Perhaps further escalation. Or perhaps, the beginnings of a new global trade equilibrium—one less reliant on mega-agreements and more focused on bilateral pragmatism.
What is clear is that the era of unchecked globalisation is over. This is a messier, more multipolar world. In this world, the winners will not be those who shout the loudest but those who listen, adapt, and build trust.
India is doing exactly that. While the U.S.
and China trade barbs and the EU scrambles for cohesion, India is laying tracks for a new kind of trade leadership—flexible, fast, and fiercely strategic. The global economy may be fragmenting. But in the middle of the storm, India is charting a path that others may soon try to follow.
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