Context:

• The world economy is witnessing its most turbulent phase since the creation of the World Trade Organization (WTO).
• The traditional champions of globalization — the US, the EU, and China — have turned into major disruptors.
• Trade, technology, and energy have become tools of geopolitical competition.
• In this volatile, uncertain, complex, and ambiguous (VUCA) world, India must redefine its economic strategy to protect its interests and capitalize on emerging opportunities.

The Changing Nature of Global Trade:

• End of globalization consensus:
  • Once the pillars of free trade, the US and EU are now weaponizing their market access.
  • China, leveraging its control over manufacturing and supply chains, uses trade as a strategic weapon.
• Economic cold war between the US and China:
  • US export controls: On semiconductors and advanced technology aim to slow China’s technological ascent.
  • China’s countermeasures: Restrictions on rare earth and critical mineral exports, vital for defence, electronics, and green tech.
  • Outcome: Prolonged supply chain standoffs and a new economic Cold War scenario.

The US - Weaponising Tariffs and Energy Policy:

• Tariffs as geoeconomic tools:
  • “Liberation Day” tariffs (April 2024) under former President Trump violated WTO rules, turning trade duties into instruments of political coercion.
  • India’s exports to the US fell by 37% between May and September 2024 — a direct fallout of these tariffs.
• Energy politics and global instability:
  • The US pressures allies to buy American energy and avoid Russian crude. The EU alone has pledged $250 billion/year to buy US energy.
  • India faces penalties for importing cheaper Russian oil, despite the US still being a net oil importer with a $60 billion deficit in 2024.
  • By forcing global buyers toward limited US supplies, Washington risks creating artificial shortages, inflating prices, and destabilising energy markets.

The EU - Green Protectionism Disguised as Climate Policy:

• Carbon Border Adjustment Mechanism (CBAM):
  • Effective January 2026, CBAM imposes import taxes on carbon-intensive goods like steel, aluminium, and cement.
  • It is revenue-driven, not environmentally transformative — a tool of “green protectionism.”
  • Already, India’s steel and aluminium exports to the EU fell by 24% in FY 2025 during the “reporting-only” phase of the CBAM.
• The deforestation regulation (EUDR):
  • Restricts imports of products like coffee, palm oil, and leather unless proven deforestation-free post-2020.
  • Could expand to all industrial and agricultural imports in the next decade.
  • India must seek safeguards in its free trade agreement (FTA) negotiations with the EU.

China - Industrial Dominance and Strategic Leverage:

• Manufacturing supremacy:
  • China dominates global production in electronics, EVs, solar panels, lithium-ion batteries, and chemicals.
  • Produces 50 million vehicles annually (55% of global demand), compared to 10 million in the US.
  • This has resulted in factory closures across the US, EU, and emerging economies.
• Control over critical minerals:
  • Refines 70% of global rare earths, essential for defence and clean energy.
  • Recent export approvals requirement weaponises supply chains.
  • US retaliation: 100% tariffs on Chinese goods.
  • Outcome: Global trade conflict escalation hurting both China and others.

Implications for India:

• Challenges:
  • Rising tariff barriers, green protectionism, and supply chain vulnerabilities.
  • High production costs (25% higher than China) due to expensive power, credit, and import duties.
  • The $100 billion trade deficit with China persists.
• Opportunities:
  • As global powers decouple, India can attract supply chains shifting away from China.
  • Potential to emerge as a neutral production and trade hub in an era of “power-based trade.”

India’s Strategic Roadmap:

• Three core pillars:
  • Strengthening domestic manufacturing: Build scale in key sectors like electronics, defence, and green technology.
  • Safeguarding strategic autonomy: Maintain independence from US–China rivalries.
  • Securing supply chains: Diversify energy and raw material sources.
• Policy priorities:
  • Lower production costs through infrastructure, credit reform, and cheaper energy.
  • Diversify trade partnerships beyond traditional markets.
  • Ensure fair environmental and digital trade rules in FTAs.
  • Encourage anchor investments (like Suzuki in autos, Apple in smartphones) to create ecosystem spillovers.

Way Forward:

• Focus on manufacturing competitiveness and self-reliance (Atmanirbhar Bharat) as the foundation of global integration.
• Build strategic alliances with nations seeking stable, rule-based trade.
• Promote technology transfer, skill development, and innovation ecosystems.
• Strengthen participation in global value chains (GVCs) through quality and reliability.

Conclusion:

• The global trade landscape is shifting from rules-based cooperation to power-based competition.
• As the US weaponises tariffs, the EU deploys green barriers, and China uses industrial dominance as leverage, India must rely on strategic autonomy, strong domestic capabilities, and resilient supply chains.
• In a VUCA world, India’s path to economic security lies not in alignment but in self-reliance backed by competitiveness — turning disruption into opportunity.