The new Trump administration would like India and other allies to play ball to help reshape the world order. India can expect immense pressure to reduce tariffs on agricultural products, processed food and beverages, automobiles, as well as technological gadgets.

At the heart of the incoming Trump administration’s vision of global affairs lies a desire to maintain US supremacy in the 21st century by taking on China, which has for some decades now been viewed as America’s principal military and economic rival.

India, which is increasingly seen as a strategic ally of the US in Asia, will inevitably be called upon to play a role in President Donald Trump’s efforts to reshape the world order under the banner of “America First.” However, the problem for the Trump administration is that India and many other nations considered US allies are still wary of being involved in either a trade war or a strategic conflict with Beijing.

Nevertheless, these nations at the same time, like the US, believe they need to take measures to insulate themselves from the huge over-capacities that China has built up and with which it is flooding global markets, threatening the global trading order as never before.

China’s overcapacity is a global headache

The crux of this problem is that China has been producing far more goods than its domestic market and foreign markets can consume, leading to severe overcapacity. This has caused widespread factory shutdowns and losses worldwide. The US has long criticised China on this issue.

US Treasury Secretary Janet Yellen recently warned that China has become “simply too large for the rest of the world to absorb this enormous capacity.” India, too, has voiced its concerns, particularly regarding the impact of Chinese overcapacity on markets for steel, electronics, and solar panels. China’s steel surplus alone, by the early 2000s, was greater than the combined output of the US, Germany, and Japan. By the 2020s, China had excessive production in sectors ranging from coal and aluminium to electric vehicle batteries and robots, contributing to market distortions worldwide.

The American tariff attack

The Trump administration’s solution to China’s practice of underselling rivals has often been tariffs—an approach that hasn’t always been effective. During his first presidency, Trump imposed tariffs of 10–25% on many Chinese goods. According to China International Capital Corp (CICC), these tariffs reduced China’s exports to the US by 5.5% and cut China’s GDP growth by about 1 percentage point. If Trump follows through on his threat to impose a 60% tariff on Chinese goods in his second term, China’s export and GDP growth could shrink by up to 2.6 and 0.3 percentage points, respectively.

More recently, the US has responded to China’s dominance in clean energy products with a two-pronged approach: high tariffs on Chinese imports and substantial domestic investment through the Inflation Reduction Act (IRA).

While the tariffs aim to limit the influx of Chinese goods like solar panels and electric vehicles, the IRA seeks to foster a competitive US clean energy sector by boosting local production. However, this dual strategy risks repeating China’s model of massive state-backed industrial growth, potentially destabilizing global markets further.

The problem for India and other US allies is that while Trump will gun for China it is also likely to gun for all those nations which have a trade surplus with the US. India is 11th in the list of countries enjoying a trade surplus with Washington. And Trump has already in his election speeches singled out India as the “biggest charger” (of import taxes) on American products.

It is important to bear in mind that India–US merchandise trade was estimated at $US120 billion in 2023–2024. A key reason for this is that the US is one of the few countries with which India does not have a trade deficit and has a significant trade surplus.

India can expect immense pressure to reduce tariffs on agricultural products, processed food and beverages, automobiles, as well as technological gadgets, besides demanding that India protect American patents and reduce the flow of generic pharma exports to the world.

The US has already imposed significant tariffs on several commodities such as dairy products (188 percent), cereals and food preparations (193%) and oilseeds, fats and oils (164%). The alternative to India agreeing to reduce duties would be more punitive measures against its exports.

The way out could, of course, be a trade-off with both sides agreeing to lower tariff barriers.

Will America co-opt India?

However, the new Trump administration will also try and co-opt India into new trading and supply chain partnerships to counter China. This may actually prove beneficial to New Delhi, though India’s ability to take advantage from such moves may well be limited.

Concerned about its own manufacturers’ competitiveness, India has refrained from joining major global trade agreements. For example, while some in India hoped to benefit from the US decoupling from China, the gains largely went to other countries—Vietnam, Taiwan, Mexico, and Canada—while India’s exports to the US grew more modestly (54% from 2018 to 2023). India’s goods exports to the US rose to $83.77 billion in 2023, compared to Mexico’s $475.6 billion and Vietnam’s $114.44 billion.

While the US sees India as a natural ally in countering China’s growing influence in Asia, it remains concerned about India’s neutral stance, especially given India’s ongoing border discussions with China. Although India has signed agreements to defuse military tensions with China, some American observers worry that these could signal a shift toward détente between the two Asian giants. Nevertheless, India’s relationship with the US has strengthened in recent years, particularly through initiatives like the Quad (a security dialogue between the US, Japan, Australia, and India). Trump is likely to prioritize revitalizing the Quad, but the US has expressed frustration with the slow pace of some Quad members’ responses, including India.

To address this, the US has pursued a parallel defence strategy through AUKUS (a trilateral security pact between the US, the UK, and Australia), aimed at countering China’s rising power.

However, India’s strategic location—controlling vital maritime choke points like the Strait of Malacca, the Strait of Hormuz, and the Suez Canal—makes it an invaluable partner for any nation seeking influence in the Indo-Pacific. Hence, Trump may continue his bromance with his friend Prime Minister Narendra Modi.

(Jayanta Roy Chowdhury is former Resident Editor-East, Press Trust of India)

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