Emerging Faultlines

The return of Donald Trump to the White House has dramatically reshaped the global geopolitical landscape, particularly in the realms of trade and strategic alignments. While some of these changes may be guided by his broader ambition of making America “great again”, there is also a growing sentiment ~ both within and outside the United States ~ that his actions are shaped as much by transactional and personal motivations as by strategic vision. At the heart of these shifts lies a reinvigorated tariff war, which has not only targeted traditional rivals like China but also extended to strategic partners such as India and members of the BRICS bloc.

Trump’s first tenure was marked by a clear foreign policy orientation that sought to contain the rise of China. Recognizing China as the principal challenger to American supremacy, his administration sought to forge new alignments in the Indo-Pacific, bolstering ties with countries such as Japan, Australia, and India to act as counterweights. The strategic language was often couched in terms of preserving a free and open Indo-Pacific, in which the U.S. portrayed itself as a Pacific power with legitimate stakes in the region’s balance of power.

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However, Trump’s second stint has seen a notable pivot: economic protectionism now trumps strategic consistency, and trade wars are being used not only as economic instruments but as tools of geopolitical leverage. The imposition of tariffs on India – America’s largest democratic partner and a crucial player in the Indo-Pacific ~ is a startling manifestation of this shift. On August 7, President Trump signed an Executive Order imposing an additional 25 per cent tariff on Indian goods, raising the overall tariff to a staggering 50 per cent. The rationale given was India’s continued purchase of Russian oil, which the White House claimed represented an “unusual and extraordinary threat” to American national security and foreign policy interests.

Yet this reasoning appears riddled with inconsistencies and accusations of double standards. Data shows that India accounted for only 13 per cent of Russia’s fossil fuel revenue since the start of the Ukraine war, whereas the European Union ~ despite its anti-Russia rhetoric – contributed 23 percent. Still, the EU has been spared punitive tariffs, while India faces the economic brunt. This selective application of punitive measures suggests that the logic behind the tariffs is not solely grounded in principled foreign policy. It increasingly looks like an attempt to pressure countries that have limited leverage over the United States.

Unlike China, which retaliated against earlier tariffs by banning the export of rare earth minerals ~ forcing Washington to reduce its tariff burden – India lacks such economic levers. With a vast population dependent on agriculture and dairy, New Delhi has long resisted opening up these sensitive sectors. Trump’s insistence that India must make concessions in these very sectors adds further strain, as such demands are politically unacceptable in the Indian domestic context. Prime Minister Narendra Modi has responded with firmness, making it clear that India will not compromise the interests of its farmers, fishermen, and dairy producers. Speaking at a public event, he acknowledged that India might have to pay a heavy price for its stance, but asserted his readiness to bear it.

This defiant posture marks a significant deterioration in US-India trade ties, especially since Washington has simultaneously ruled out any further trade talks until the matter is resolved. For a relationship once touted as among the most consequential of the 21st century, the fallout is deeply disconcerting. What adds to the complexity is Trump’s seemingly contradictory behavior towards other global actors. His previous hostility toward NATO and its European members has, in this tenure, given way to more transactional economic deals with both the EU and the UK. He has managed to extract higher defense spending from them, fulfilling one of his long-standing demands.

Meanwhile, Trump’s initial soft posture toward Russia – based on the belief that he could persuade President Putin to end the war ~ has hardened as that expectation failed to materialize. Yet, rather than directly penalizing Russia, Trump has chosen to exert pressure on countries like India that maintain energy ties with Moscow. Even more puzzling is Trump’s stance toward China. Despite earlier confrontations, he now appears to be exploring a potential trade deal with Beijing. There is speculation that he may even visit China, signaling a thaw that could have wide-ranging geopolitical ramifications. This approach stands in stark contrast to the harsh tariff measures directed at India and Brazil, both of which are BRICS members.

Trump has also described BRICS as an anti-US bloc and blamed the group for pushing de-dollarization ~ claims that are contested and oversimplified, but serve to justify further economic penalties. The net effect of these shifting positions is a growing perception that Trump’s foreign and trade policies lack coherence and are driven more by short-term gains and political optics than by long-term strategic thinking. For India, this unpredictability represents a significant challenge. The country must now navigate an increasingly volatile external environment in which even its traditional partnerships can no longer be taken for granted. The economic consequences are already visible.

According to Moody’s, the new tariffs could slow India’s GDP growth by 0.3 percentage points in FY2025-26, pulling it down from 6.3 per cent to around 6 per cent. Key sectors like electronics manufacturing may see reduced foreign investment due to the tariff gap compared to other Asia-Pacific economies. Investor sentiment is weakening, with foreign portfolio investors pulling out $2 billion in July and nearly $1 billion more in early August. Although the stock markets have shown some resilience, the broader trend is one of caution and concern.

Meanwhile, China’s recent export restrictions on rare earth elements have highlighted the vulnerabilities in America’s high-tech and defence manufacturing sectors. While the U.S. has invested in domestic production and diversification strategies, it remains years away from building a self-reliant supply chain. This gives China a significant bargaining chip in any future negotiation ~ one that India lacks. Trump’s willingness to go easier on China while punishing India only reinforces the perception that his administration picks its targets based on expediency rather than principles.

Adding another layer of complexity is Trump’s sudden pivot toward Pakistan, a country he had once derided as duplicitous. His recent deal with Islamabad and the hosting of Army Chief General Munir at the White House are being viewed as part of a larger recalibration in the Indo-Pacific. Taken together with his softer posture toward China, this development raises serious questions about U.S. strategic priorities in the region and how India figures in the American calculus going forward. India, therefore, faces a geopolitical moment that demands both caution and clarity.

As Trump’s second tenure introduces a mix of unpredictability, pressure tactics, and transactional diplomacy, New Delhi must work to safeguard its long-term interests without compromising its sovereign decision-making. This will require not only diversifying its strategic partnerships but also strengthening domestic economic resilience in the face of external shocks. The tariff war may just be one front ~ but the battle for geopolitical stability is far from over.

The writer is Associate Fellow, Manohar Parrikar Institute for Defence Studies & Analyses