As the United States under President Donald Trump intensifies its economic confrontation with China, a new strategic vision is emerging—one that aims to not just impose tariffs but to form a geopolitical coalition. At the heart of this evolving plan? India.
The Grand Encirclement Strategy
Treasury Secretary Scott Bessent, is advancing a strategy insiders have dubbed the “grand encirclement.” The idea is to forge a diplomatic and trade alliance with key Asian economies—India, Japan, Vietnam, and South Korea—to economically isolate China and reduce its dominance over global supply chains.
“They’ve been good military allies, not perfect economic allies. But we can probably reach agreements with them. Then we can approach China as a group,” Bessent explained .
Why This Strategy Matters: Beyond Economics
This effort is more than just a trade war—it’s a geopolitical maneuver. Trump’s towering tariffs on China (some over 140%) are the stick; a 90-day pause on new tariffs for others is the carrot. This temporary reprieve creates a crucial window for striking new deals—ones that redirect global trade, tighten alliances, and isolate Beijing economically.
India, with its massive market, growing skepticism toward China, and aspirations to be a global power, is uniquely positioned to become the cornerstone of this strategic shift.
Strategic Realignment: Trade as a Geopolitical Tool
Bessent’s vision treats trade negotiations as instruments of power projection. The goal is to redraw supply chains, reducing dependence on China while binding nations more tightly into a U.S.-led economic sphere. India’s rejection of Chinese investment—such as a $1 billion EV plant by BYD—and its openness to U.S. tech giants like Tesla, are indicative of this recalibration.
Decoupling with Leverage: The 90-Day Window
The 90-day tariff pause gives the U.S. leverage: nations that agree to buy more American goods, crack down on Chinese transshipment, and raise tariffs on China may be spared additional U.S. duties. For India—already seeking to diversify trade and boost exports—this presents an opportunity to secure favorable access to the U.S. market while advancing its own national interests.
India’s Strategic Posture: From Transactional to Transformational
India is no longer engaging the U.S. solely on a transactional basis. New Delhi is actively pursuing a comprehensive bilateral trade agreement that spans digital commerce, labor mobility, goods, and tech collaboration.
However, Indian negotiators have ruled out a “zero-for-zero” tariff deal, arguing that such parity is feasible only between developed economies. Instead, India is proposing a “package deal” model, offering targeted concessions in sectors like textiles, agriculture, chemicals, and gems in exchange for market access and technology transfer.
Domestic Policy in Sync with U.S. Objectives
India’s protectionist policies are aligned with Trump’s vision. It imposes 100% import duties on fully built cars—among the highest globally—protecting domestic manufacturers like Tata and Mahindra. It has also enhanced scrutiny of trade routes from Sri Lanka, UAE, and Oman to block Chinese goods from sneaking in.
Commerce Minister Piyush Goyal summed it up aptly: “India has a lot of elbow room for trade deals with developed nations. But we must be cautious about dumping from China.”
Shared Interests, Accelerated Talks
U.S. officials confirm that trade talks with India are progressing faster than with other partners, driven by mutual concerns over China and India’s limited exposure to U.S. tariffs.
India’s Calculated Hedging
India isn’t blindly aligning with Washington. It remains deeply integrated with Chinese supply chains—especially in electronics and machinery. Nearly 40% of Vietnam’s imports, for instance, originate from China; India’s numbers in similar sectors are close.
India also hopes to capture the U.S. market share currently held by Chinese e-commerce exporters. With the U.S. planning to impose over 120% tariffs on low-value Chinese shipments from May onwards, this opens up a window for Indian small businesses, handicraft exporters, and fashion retailers—provided bureaucratic hurdles are eased.
Europe: The Uncommitted Player
While India leans closer to the U.S., Europe remains uncertain. Trump’s blanket tariffs have antagonized many allies. French President Emmanuel Macron recently highlighted the $59 billion in annual tariffs the EU faces—almost equivalent to three years of U.S. military aid to Ukraine.
Spain’s Prime Minister Pedro Sánchez has shown signs of gravitating toward Beijing, drawing criticism from Bessent. European Commission President Ursula von der Leyen is advocating for mechanisms to monitor trade diversions from China, but Brussels remains hesitant to fully align with Washington.
“Friends and foes are being treated the same,” lamented Jeppe Kofod, Denmark’s former foreign minister. “It’s crazy time.”
Internal Divisions in Trump’s Team
Despite Bessent’s strategic push, Trump’s administration is far from unified. Key figures like Peter Navarro and Commerce Secretary Howard Lutnick remain focused on short-term manufacturing wins and tariff revenue, not long-term geopolitical strategy.
“There’s a risk of performative deals that help specific companies rather than meaningful, balanced agreements,” said Lori Wallach of Rethink Trade. Even insiders admit that Trump’s unpredictable goals often leave foreign negotiators confused.
As Doug Holtz-Eakin, a conservative economist, noted: “There’s no idea what they want from other countries, and worse is that other countries don’t know what Trump wants from them.”
Conclusion: India’s Moment of Opportunity
In a volatile and fragmented global landscape, India may prove indispensable to Trump’s broader trade and strategic ambitions. As Europe hesitates and Southeast Asia treads cautiously, New Delhi’s unique combination of scale, independence, and anti-China posture makes it both a partner and a pivot in the evolving contest to reshape global trade—and sideline Beijing
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