Sparring superpowers, guarded India

A quiet global transformation is in the making amid protracted trade talks and a technology rift between the United States and China, the two largest economies in the world. This has consequences for the emerging world order, with spillover effects on India.

At the centre of the issue is the US goods trade deficit with China – $295.4 billion in 2024. President Donald Trump, in his 2016 election campaign, said China was “raping” the US. It needs to be noted that while China, Mexico, and Canada had massive trade surpluses with the US, the latter imposed tariffs on almost all countries. While the US-China tariff frictions are not new and have carried over from Trump’s first presidential term, the current round is exposing the limitations of the US global outreach and impacting the rates of China’s economic growth.

While China intensified its ‘Made in China 2025’ campaign of reaching self-sufficiency in key domains such as AI, electric vehicles, drones, machine learning, renewables, and space, besides diversifying trade towards Southeast Asian countries, these have also resulted in the intensification of trade frictions with the US. However, China is prepared for the emerging spat with the Trump administration in his second term. Soon after the president’s Liberation Day tariff announcements in April, China began restricting magnets and rare earth metals, crucial for the US electronics, automobile, and defence industries. It also diversified soybean imports from the US to Brazil, hitting Trump’s rural vote base. China thus began imposing costs on the US.

Trump had no choice but to enter protracted trade negotiations with China at Geneva on May 10-12, at London on June 9-10, at Stockholm on July 28-29, and at Madrid on September 14. Presidents Trump and Xi Jinping also spoke on the phone in June and September. The tentative agreements involved the reduction or keeping in abeyance of tariffs, market access, technology, rare earth metals, and TikTok, apart from Taiwan and the Indo-Pacific region.

Trump was forced to sign an extension on August 11, keeping tariffs well below the previous announcement of 145%. A three-month truce was announced till November 11 that also included no fresh tariffs on China for importing Russian oil. Trump and Xi are expected to meet at the APEC summit in South Korea this month, rekindling the prospects for an agreement.

The US has agreed to allow the AI chips of Nvidia to be exported to China. In September, China was reported to have restricted its leading tech companies from buying the chips as part of a push for domestic manufacturing. It has also declared that it will not import soybeans from the US until tariffs are removed, even though it is reported that the Trump administration is eyeing a huge deal through the sale of Boeing aircraft.

Traditional US demands such as observing WTO-led market economy principles, removal of government subsidies to state-owned enterprises and private enterprises, and curbing over-production in steel, cement, aluminium, EVs, and solar panels have been met with stoic silence in China.

On the other hand, China has also imposed many non-tariff barriers like cumbersome customs procedures, complicated licensing requirements and regulatory measures, discriminatory practices on foreign companies, and a preference for domestic industries. This has been a common complaint relevant to China’s discriminatory practices and is not unique to the US firms.

The intensification of the trade and technology spat between the US and China is a symptom of the emerging power transition in the global order, escalated further by the US-Russia conflict and the emergence of a multi-polar world, as reflected in the BRICS expansion and the Shanghai Cooperation Organisation. In this context, while the US also imposed debilitating tariffs on India, as with many countries, New Delhi has not retaliated, unlike Beijing. Part of this is due to the low dependence on trade as a composition of the Indian gross domestic product, but also in deference to the two-and-a-half decades of US-India relations.

India is also concerned about the untrammelled rise of China and is aware that China has been weaponising diplomacy, economy, trade, and tourism. India has also witnessed China’s restrictions on rare earth metals and tunnel-boring machines, the recall of engineers and technicians from the Foxconn mobile assembly plants, and other coercive measures.

China has a massive trade imbalance in its favour with India, and Beijing imposed debilitating non-tariff barriers on Indian products. This poses twin-pronged challenges from Beijing and Washington to New Delhi that need to be addressed cautiously.

The writer is a JNU Prof, who has been Peking behind the Bamboo Curtain for 30 years.

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.