The year 2025 may come to be seen as a watershed in post-War global history. With Donald Trump returning to the White House, the United States abandoned long-standing multilateral commitments and embraced an aggressively unilateral economic posture. The cumulative effect of these decisions has reshaped global trade, unsettled alliances, and forced major economies — including India — to rethink the meaning of strategic autonomy in a fractured world order.
Why Trump’s second term altered the global balance
From the moment he assumed office for a second time, Trump moved swiftly to dismantle pillars of post-1945 global governance. The US withdrawal from the Paris Agreement under the UN climate framework and from the World Health Organization signalled a retreat from collective action on climate change and global health. But it was the announcement of the “America First Trade Policy” that proved most consequential, directly affecting how nations trade, invest, and align.
This policy was framed not merely as economic nationalism, but as a national security doctrine — asserting that America’s prosperity, technological edge, and military dominance required centralised control over trade decisions by the federal government.
Tariffs as the primary instrument of power
Unlike earlier trade disputes, the America First Trade Policy relied almost exclusively on tariffs as a strategic weapon. Trump’s administration announced steep “reciprocal tariffs” on 57 countries in April, though their enforcement was deferred to extract concessions. The immediate impact was higher transaction costs and policy uncertainty for export-dependent economies.
More enduring, however, was the shock delivered to global value chains (GVCs). For three decades, GVCs had enabled efficiency through cross-border production networks. Trump’s tariff wall disrupted this logic, incentivising reshoring within the US and weakening the economic rationale of deeply integrated supply chains.
From friendshoring to protectionism
The shift marked a sharp break even from the policies of Trump’s predecessor. While the Biden administration had promoted “friendshoring” through initiatives like the Indo-Pacific Economic Framework for Prosperity, it did not reject global value chains outright. Trump’s approach went further, erecting a protectionist framework that bordered on economic isolationism.
By concentrating trade policy authority in the executive, Trump also dealt a severe blow to rule-based multilateralism. For nearly eight decades, trade rules evolved through consensus — first under the General Agreement on Tariffs and Trade (GATT), and later under the World Trade Organization (WTO). With unilateral tariffs replacing negotiated rules, the WTO now faces an existential crisis.
Why China and India refused to yield
Of the 57 countries targeted, the US managed to close deals with only 17. Negotiations failed with “” and “” — two large economies unwilling to concede under pressure. China responded with credible threats of retaliation, while India absorbed tariffs as high as 50 per cent without altering core positions.
Ironically, this hardline stance produced an unintended geopolitical outcome. In August, the Indian Prime Minister and the Chinese President met in Tianjin — a largely symbolic but significant thaw after years of standoff. By year-end, direct flights resumed and visa regimes eased, indicating cautious normalisation.
Trade data and the quiet reset in India–China ties
Economic numbers underline why this rapprochement mattered. India’s exports to China had fallen to just over $14 billion in 2024–25, the lowest since 2017–18, dropping China to India’s fifth-largest export destination. Following the diplomatic thaw, exports surged — rising over 90 per cent in November and more than 33 per cent in the first eight months of the financial year.
At the same time, both India and China reduced their exposure to the US market. China’s export share to the US fell from nearly 22 per cent in 2017 to around 10 per cent by November 2025. India, too, cut its dependence from almost 23 per cent to about 20 per cent over the same period.
India’s search for strategic autonomy
Perhaps the clearest long-term impact of Trump’s trade disruption has been India’s accelerated diversification strategy. A series of free trade agreements concluded in 2025 and renewed engagement with the Eurasian Economic Union during “”’s visit to New Delhi reflected a conscious effort to reduce reliance on any single major economy.
This is less about decoupling from the US and more about insulating India from geopolitical shocks. In that sense, 2025 reinforced a long-standing Indian objective — strategic autonomy — but under far more turbulent global conditions.
What to note for Prelims?
- America First Trade Policy and its core features
- US withdrawal from Paris Agreement and WHO
- Role of tariffs versus multilateral trade rules
- Decline in WTO’s relevance due to unilateralism
What to note for Mains?
- Impact of protectionism on global value chains
- Unilateral trade policies and the crisis of multilateralism
- India–China trade reset under external pressure
- Strategic autonomy as a response to global economic uncertainty
