The victimhood gambit: Tariff wars without an endgame

The POTUS, who leads a thirty trillion-dollar economy, is accusing trade allies and rivals alike that they are ripping his country through unfair levels of tariffs. This is the classic playbook of the victimhood of dominance. It is not that Trump wants to enhance his country’s freedom to trade, it simply is that he wants to curtail the freedom of other countries on how they might trade. As the world watches Donald Trump’s latest salvo of tariffs, there is an unsettling sense of déjà vu – an echo of the past colliding with the uncertain contours of the changing rules of global trade. In announcing sweeping tariffs on China, Trump has reignited a trade war that in the language of contract bridge would be called a no-trump gambit – a strategy where a player, with a strong hand bids to win the contract, often to preempt the opponents from reaching a game. But this is not just a game between two economic superpowers – it is the beginning of the reshaping of the global order.

Trump’s strategy – if it can be called that – is remarkable for its lack of vision, or a roadmap for where we go from here. Tariffs have historically been deployed as short-term bargaining chips or protectionist tools. But the Trump tariffs appear less like instruments of negotiation and more like blunt force trauma – inflicted on countries and not products, without clear objectives, benchmarks, or off-ramps. In short, a trade strategy with no endgame, and a road that leads nowhere but deeper into economic uncertainty. The immediate fallout of these tariffs will be borne by global supply chains, already fragile in the post-pandemic landscape. According to the World Trade Organisation (WTO), global merchandise trade volume contracted by 1.2 per cent in 2023, and early indicators for 2025 suggest a further contraction. Escalating tariffs risks further chilling investment and economic confidence.

India, whose comparative advantage lies not in factory lines but in code, consulting, and customer support, may appear to be standing on the periphery of this trade battlefield. But that is a dangerous illusion. India exported over $325 billion in services in 2023, accounting for more than 40 per cent of its total exports. Its heavy reliance on services – particularly IT, business process outsourcing, and digital technologies – makes it vulnerable to indirect shocks. India must resist the temptation to respond with knee-jerk protectionism. Instead, it must see this moment as a pivot to reform, resilience, recalibration, and to diversify trade partnerships. It must reduce its overdependence on the US and China. In 2023, China and the US together accounted for nearly 25 per cent of India’s total trade. Deepening ties with the European Union and ASEAN is imperative.

At a time when the US appears to be abandoning the international rules-based order it once helped build, India must become a credible voice for reforming, not retreating from, the multilateral institutions. Active engagement with the WTO, BRICS, G20, and regional coalitions will be key.

Perhaps the most complex question for Indian policymakers is – how to engage with China in the shadow of a deepening US-China rift? India must tread a path of calibrated pragmatism. While the geopolitical frictions with China – such as the Galwan clashes and the festering border issue – have strained relations, outright economic disengagement is neither feasible nor wise. In 2023, bilateral trade between India and China stood at $118.4 billion, with India importing a significant share of its electronics, machinery, and APIs from China. Strategically, India should adopt a dual-track approach – decouple where necessary (critical technologies, national security sectors), and engage where mutually beneficial (green energy, climate finance, regional stability). Trade relations should not be viewed through the binary lens of coalitions but through the prism of national interest.

The global trading system is entering a turbulent phase, marked by distrust, decoupling, and disarray. Trump’s tariffs are the latest symptoms of a deeper malaise – one that questions the essence of globalisation as we have known it. In these times, India must protect its interests but also define a new role for itself as the steward of a stable, fair, and future-ready global order. A crisis is too valuable to waste. The Trump tariffs may have no endgame, but for India, they may mark the beginning of a new strategic clarity – positioning itself as the sagacious voice of reason and the bridge over troubled waters.