In the 1990s, China began rapidly expanding its manufacturing capacity. At the same time, India, grappling with a balance of payments crisis, launched sweeping economic reforms—dismantling the Licence Raj and opening up to the global market. These reforms sparked a surge in economic growth.
Meanwhile, the United States dramatically increased outsourcing to China, turning it into a critical trading partner. In 2001, China joined the World Trade Organization—a watershed moment in global trade. By 2008, the Communist Party-led nation had overtaken the US as the world’s dominant manufacturing powerhouse.
Nearly two decades later, the US, under Donald Trump, is attempting to reverse over 40 years of globalisation that helped fuel China’s rise.
America now seeks to ‘decouple’ from China, raising import duties to a staggering 145%. For the rest of the world, including economies seen as transhipment hubs for Chinese goods, Trump’s pause offers a glimmer of hope, with a 90-day window to negotiate deals. Yet, the hardline views of Peter Navarro, the controversial economist and author of Death by China, and Stephen Miran, the current Chairman of the Council of Economic Advisers, suggest that the global trade war is far from over.
For India, this dramatic shift in the world trade order presents a critical question: Can it seize the moment to position itself as a credible alternative to China? Some answers can be found in the recent debate after Commerce Minister Piyush Goyal’s comments on Indian start-ups. Many founders argue that the true hurdle to entrepreneurship in India isn’t capital or talent, but “regulatory cholesterol”. A modern-day compliance raj throttles ease of doing business across our nation.
There are signs that the government, perhaps frustrated by the stagnant share of manufacturing in India’s GDP despite years of policy support, is preparing to pivot. A proposed deregulation commission could usher in a new wave of reforms, unlocking Indian enterprise and industrial potential.
Trump’s tariff shock offers India a rare strategic opening. As countries race to strike deals with the US and reduce dependency on China, India must act fast, finalising trade pacts not just with the US, but the United Kingdom and the European Union, among others. A bunch of new trade agreements this year could echo the transformative spirit of the early 1990s and help mitigate risks to Indian exports.
To do so, India must also be ready to confront its long-standing red lines on agriculture and dairy imports. The nation cannot be held hostage to a few entrenched domestic lobbies. Businesses that can’t compete must adapt or make way.
The globalisation-fuelled era of trade is on its knees, and India must stay nimble. For now, Donald has ducked his fight with everyone except China, but he may return with a sucker punch.
Let us not miss this moment. Trump may not knock twice.
