Trump's tariff war: How India, China and Russia are testing US power - what's next

President Trump's second-term trade policies, characterized by new tariffs including 50% levies on Indian goods, are pushing global commerce away from the US, evidenced by a decline in the US share of global imports from 20% to 12%. This unilateralism is prompting traditional allies to hedge and retaliate, accelerating the strategic alignment of nations like India, Russia, and China, which are deepening economic and geopolitical ties. This shift indicates a significant reordering of global influence and increased uncertainty for the US-led international order.

Analysis

President Trump's second-term trade policy, marked by aggressive unilateral tariffs including 50% levies on Indian and Brazilian goods, is accelerating a structural shift in global commerce and alliances. The data indicates a tangible decline in US economic centrality, with its share of global imports falling from 20% to 12% since 2000, and trade within the BRICS bloc now surpassing its members' trade with the US. This policy is prompting traditional allies to hedge their geopolitical exposure and retaliate, as seen with actions from Canada and Japan. A key development is the cautious revival of the Russia-India-China (RIC) strategic triangle, driven by necessity despite deep-seated mistrust, particularly between India and China. While the Reserve Bank of India's governor projects a "minimal" impact from the tariffs, Fitch Ratings offers a more cautious outlook, warning that the duties will reduce India's ability to capitalize on supply chain shifts from China. In a clear sign of strategic hedging, major Indian conglomerates are reportedly exploring EV technology partnerships with Chinese firms like BYD and CATL, even as India's exports to the US remain substantial at $77.5 billion in 2024. This complex dynamic, underscored by a strongly negative sentiment score (-0.65) and high market impact (0.8), points toward increasing global fragmentation and a period of heightened geopolitical uncertainty.

Key Decisions for Investors

• Investors should increase scrutiny on geopolitical risk, particularly monitoring developments in the Russia-India-China relationship and the upcoming US midterm elections as catalysts for market volatility.
• For portfolios with Indian exposure, differentiate between export-oriented sectors vulnerable to US tariffs and domestic champions or companies forging new strategic partnerships in high-growth areas like EVs.
• Evaluate companies based on their supply chain resilience, potentially favoring those with diversified manufacturing bases or those positioned to benefit from increased trade within non-US-aligned economic blocs like BRICS.
• Note the specific opportunities for Chinese EV technology and battery suppliers such as BYD, which stand to gain from strategic hedging by nations like India seeking to secure critical technology outside of Western supply chains.