We need to talk about China

Even if Donald Trump buckles, the world economy faces important difficulties

- AJAY SHAH & RENUKA SANE

The world has been consumed by the international relations theatre and discussions of economic statecraft after American President Donald Trump's "Liberation Day". The tariffs imposed by the United States (US) and the retaliatory measures by China have turned into a trade war between the two giants, and a great deal of disruption for all other countries. As the true impact of the tariffs begins to hit American consumers and businesses, the Trump administration has started to feel the heat from domestic constituencies. There is a possibility of a rollback of the new tariffs even without Chinese concessions. The reversal of US tariffs will represent a capitulation, and many will spin it as a Chinese triumph. But the deeper story is more complicated. Even if we return to the trade status quo that existed before April 1, 2025, China will emerge weaker from this episode. And that has important implications for the rest of the world, and for us in India.

The Chinese government made important mistakes during the Covid-19 pandemic. It chose to support Russia in its invasion of Ukraine in 2022. Embracing nationalism, it chose hostile behaviour against India in 2017 and 2020. All this led up to "the third globalisation", where long-standing discontent about Chinese misbehaviour in economic nationalism bubbled up into coordinated action against the country.