India must respond wisely to Trump’s trade

Source: The post India must respond wisely to Trump’s trade has been created, based on the article “Pratap Bhanu Mehta writes: India must stand up to Donald Trump, the bully” published in “Indian Express” on 5 April 2025. India must respond wisely to Trump’s trade.

UPSC Syllabus Topic: GS Paper2-International Relations-Effect of policies and politics of developed and developing countries on India’s interests.

Context: Donald Trump’s aggressive and unpredictable trade policies have disrupted the global trading system. His focus on bilateral trade balances and use of tariffs as political tools have raised global concerns. This situation has triggered a debate in India: whether to resist Trump’s demands or align with them for short-term strategic gains.

For detailed information on Trump’s Policies Impact India’s Economy and Workers read this article here

Nature of Donald Trump’s Trade Actions

1. Imperialistic Intent: Trump’s actions are not about promoting global trade but about establishing American dominance. He focuses on bilateral trade balances, ignoring multilateral norms that ensure fairness.
2. Discretionary Tariffs: Tariffs are used as tools of domestic patronage. For instance, chips were exempted for national security, showing how unpredictable and arbitrary such decisions are.
3. Institutional Instability: Trump’s actions weaken the credibility of U.S. institutions like the Federal Reserve, making the global financial system less predictable and more vulnerable.
4. Zero-Sum Mindset: He treats trade as a zero-sum game aimed at American primacy, rejecting the idea of interdependence and cooperation that global trade depends on.
5. Impact on Allies: Even close allies like Israel face unpredictable tariffs, showing that no country is immune to this unilateral approach.

Trump’s Actions Affect Global Economic Credibility

1. Erosion of Rules-Based Trade: His policies disrupt the predictable structure of global trade. They are based on power, not rules.
2. Arbitrary Tariff Implementation: His selective imposition of tariffs introduces uncertainty in global trade, harming even trusted partners.
3. Institutional Credibility Damage: By politicising institutions like the Federal Reserve, he reduces global trust in the U.S. economic system.
4. Promotion of Unstable Alternatives: Trump’s support for cryptocurrencies threatens the stability of traditional global finance.
5. Undermining Cooperation: By abandoning the idea of mutual interdependence, Trump increases global tensions and economic instability.

Broader Concerns Beyond Trade

1. Institutional Uncertainty: U.S. institutions are becoming less reliable under Trump, affecting global confidence.
2. Unpredictable Tariff Use: Tariffs are no longer tools of economic correction but of patronage and revenue, as seen in arbitrary exemptions.
3. Collapse of Credibility: The U.S.’s credibility as a stable partner is fading, even among allies.
4. Threat to Labour Mobility: Trump’s anti-immigration stance threatens India’s gains from labour movement, especially in the U.S.
5. Disruption to Financial Stability: U.S. backing of crypto-assets can destabilise existing financial frameworks.

Why It’s Risky for India to Placate Trump?

1. Imperial Power Play: Conceding on tariffs won’t yield fair deals but will lead to never-ending negotiations, as shown in the case of Israel.
2. Domestic Uncertainty: The U.S. is using trade tools much like India did in the past—for political patronage, not economic logic.
3. Strategic Short-Sightedness: Any quick deal with Trump may look appealing but will likely be unreliable and unsustainable.
4. Risk to Labour Gains: Aligning with Trump won’t protect India’s labour interests abroad.

The Way Forward: Build Global Resistance

India must reject the illusion that giving tariff concessions under pressure brings progress. It must assert its sovereignty, pursue development, and work with other countries to build a global coalition against unilateralism. This is not just about trade—it’s about resisting a larger global power play.

Question for practice:

Evaluate the impact of Donald Trump’s trade policies on global economic stability and India’s strategic choices in response to them.