Source: The post “India’s Strategy in the Evolving Global Trade Landscape” has been created, based on “US, EU, China are rewriting trade rules. India needs its own playbook” published in “Indian Express” on 17 October 2025. India’s Strategy in the Evolving Global Trade Landscape.
UPSC Syllabus: GS Paper -2- Effect of Policies and Politics of Developed and Developing Countries on India’s interests
Context: Global trade is undergoing significant transformations due to the policies of the US, EU, and China. These powers are reshaping trade rules in ways that create challenges and opportunities for other countries. India, in particular, needs to adapt its strategy to protect its economic interests and seize new opportunities in this volatile trade environment.
Global Trade Trends:
- U.S.A. and China are leading the charge in reshaping global trade. U.S.A. has implemented tariffs on China to curb its dominance and force changes in global supply chains.
- At the same time, the EU has adopted protectionist policies aimed at boosting its own economic strength.
- The EU’s focus is on using environmental regulations like CBAM (Carbon Border Adjustment Mechanism) and FTR (Deforestation Regulation) to safeguard its industries, imposing stricter rules on imports like steel, aluminium, and coffee.
- The EU’s environmental regulations are particularly relevant to India’s trade relationship with Europe, as they will directly affect the costs and flow of exports.
China’s Dominance:
- China’s growing dominance in the global manufacturing sector is evident. It produces over 50% of the world’s electric vehicles and holds significant shares in critical materials such as lithium, cobalt, and rare earth elements.
- The scale of China’s manufacturing prowess, combined with its control over vital supply chains, poses challenges for other nations seeking to build resilience in their own economies.
Challenges:
- Volatility in Global Trade: The rapid policy shifts by major powers like the U.S.A. and the EU create uncertainty for India’s trade, especially as tariffs and new regulations disrupt established trade channels.
- Dependence on China: India’s current dependence on China for key materials like rare earth metals and electronic components places it in a vulnerable position as China increasingly asserts control over global supply chains.
- Environmental Regulations: The EU’s stringent environmental standards, such as CBAM and FTR, pose a challenge for India’s exports, particularly in sectors like steel and aluminum. Compliance with these regulations may raise costs for Indian businesses, impacting their competitiveness in European markets.
- Technological Gap: China’s technological edge in sectors like electronics and electric vehicles, coupled with its advanced manufacturing capabilities, makes it difficult for India to compete on equal footing without significant technological investment.
Way Forward:
- Diversifying Trade Alliances: India must focus on building new trade relationships with emerging markets and countries outside the U.S.A. and EU spheres of influence to reduce its reliance on any single market. This will help India secure access to diverse goods and services.
- Focusing on Self-Reliance in Manufacturing: Strengthening India’s manufacturing capabilities, particularly in high-tech industries, should be a priority. India should also invest in key technologies to move up the value chain.
- Securing Critical Supply Chains: India needs to invest in securing critical materials that are currently dominated by China. This includes developing alternate sources for rare earth metals and other strategic materials to avoid over-reliance on Chinese imports.
- Environmental Adaptation: India should work towards meeting global environmental standards, particularly those set by the EU, to maintain its access to European markets. This includes improving its environmental standards in manufacturing and exploring green technologies to stay competitive.
- Strengthening Geopolitical Influence: India must use its strategic position in global geopolitics to its advantage. Negotiating favourable trade deals, strengthening regional alliances, and securing its place in international trade bodies will be essential for safeguarding its interests.
Conclusion: India faces significant challenges due to the evolving global trade rules set by the US, EU, and China. However, by diversifying its trade partners, strengthening domestic manufacturing, and securing critical supply chains, India can navigate this new trade landscape. A forward-looking, self-reliant approach will help India thrive in the increasingly competitive global economy.
Question: How can India navigate the changing global trade dynamics as the US, EU, and China are reshaping trade rules?
