US President Donald Trump’s sudden U-turn on tariffs has given a severe jolt to the global economic order. His decision to pause the sweeping reciprocal tariffs—except for China—marks a rare climbdown, but it also underscores the volatility that defines Trump’s trade policy. For India, this moment is both a challenge and an opportunity. In his second term, Trump reignited global economic uncertainty, disrupting long-term decisions in stock markets and across the real economy. The magnitude of this disruption was evident: Japan’s Nikkei plunged 7.83%, Hong Kong’s Hang Seng nosedived 13.22%, and India’s Sensex dropped 2.95% in a single day. Since January 1, the Sensex has lost 6.84%, and it is down nearly 15% from its September 2024 peak of 85,978.25.
Tehelka’s cover story, “Trump’s Tariff War,” captures this churn and how India is navigating it. As the trade storm intensifies, India finds itself balancing diplomacy between two sparring superpowers—while China, under pressure from Trump’s 125% tariff barrage, is reaching out to New Delhi with appeals for solidarity among “the two largest developing countries.” Trump’s temporary suspension of tariffs above 10% for 59 countries, including India and the EU, is a tactical retreat. It offers a 90-day window to negotiate trade deals—an acknowledgment, perhaps, that waging a global trade war while pursuing his “Make America Great Again” agenda may be unsustainable. He has instead chosen to concentrate firepower on China, which now bears the brunt of US tariffs. This pivot from global confrontation to a focused bilateral battle with China is unprecedented. But it also speaks volumes: even Trump has realized that antagonizing half the world could backfire economically and diplomatically.
For India, this pause presents a strategic opening. By resisting the temptation to retaliate impulsively and instead playing the long game, New Delhi has positioned itself as a pragmatic player and must ensure to deliver on its avowed dream of scaling up bilateral trade with the US by 2.5 times. On the positive side, the tariff reprieve could boost foreign portfolio flows, strengthen the rupee, ease liquidity, and support lower interest rates.
However, the road ahead isn’t without risks. A prolonged US-China trade war threatens to disrupt global value chains, and India must guard against a flood of cheap Chinese goods being dumped into its markets. While Chinese overtures may appear friendly, India must tread carefully. Beijing’s sudden desire for solidarity masks strategic self-interest, not shared values. India’s best response lies in cautious engagement—leveraging this diplomatic window with the US, safeguarding its domestic markets, and continuing to assert its position as a reliable, rule-based economic partner in an increasingly fragmented world.
Trump’s tariff flip-flop may have rattled markets, but for India, it’s also a test of economic statecraft. The next 90 days could be decisive—not just for trade, but for India’s role in the evolving global order.
