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The VIF held a talk by Amb Mohan Kumar, Dean/Professor at OP Jindal Global University on 14 April 2025 on "Future Trajectory of International Trade and Implications for India”. After initial remarks by Dr Arvind Gupta, Director VIF, Amb Kumar spoke of how US President Donald Trump has elevated “tariffs” and “trade” to the centre of global strategic discourse—not through war, but through disruption. His talk gave a sweeping, realist appraisal of both the structural and immediate challenges that India faces in an increasingly transactional and fragmented trade environment. It was followed by a rich discussion. Some of the salient points made were:

Trump, Tariffs, and Structural Shift in Trade Politics

While Trump’s trade policies appear erratic, they follow a coherent, domestically-oriented logic. His use of tariffs is less about punishment and more about negotiation leverage, primarily targeting China but also affecting partners like India. Trump’s strategy—tariffs, deregulation, and tax cuts—aims to revive US manufacturing and secure politically critical swing states. The underlying diagnosis of American decline—deindustrialization, overextension abroad, and the end of unipolarity—is not without merit.

Importantly, Trump’s disruption must be placed in a broader historical context. The weakening of the World Trade Organization (WTO) began under President Obama, particularly with the US blocking appointments to the Appellate Body—reflecting bipartisan US unease with multilateral systems that constrain unilateral action. Trump simply accelerated this trend, wielding tariffs as blunt but effective instruments of negotiation.

India’s Strategic Restraint and Limited Leverage

In this scenario, India’s measured response was notable. Despite being affected by US tariffs, India chose not to retaliate in kind—a wise decision, given India’s limited leverage in global trade dynamics. However, this restraint has also sparked strategic complications. India's concessions to the US have attracted attention from the EU and UK, who now seek similar benefits under the Most Favoured Nation (MFN) principle—even in the absence of formal Free Trade Agreements (FTAs).

There is a risk in generalizing US-specific concessions to other partners, particularly as it could enable Chinese overcapacity to flood Indian and African markets. With China increasingly excluded from US and EU markets, India must prepare for the spillover effects—particularly in manufacturing—and reinforce its trade enforcement capacity, which currently lacks the institutional muscle to address large-scale dumping across diverse product lines.

From Tariffs to TRQs: Rebalancing India’s Trade Protectionism

The discussion also dissected the inadequacy of traditional tariff rationales—such as protecting infant industries or raising revenue. Indian sectors like dairy and agriculture, long shielded from competition, can no longer justify such protections. A more nuanced approach using Tariff Rate Quotas (TRQs) was proposed to allow calibrated competition while preserving strategic sensitivities.

There was also a strong call for tariff simplification. India's existing system—layered with multiple duties and cesses—is opaque, inefficient, and burdensome for both consumers and businesses. Trade policymaking currently overly favours producers and legacy industries at the expense of underrepresented consumer interests and must be rebalanced.

Non-Tariff Barriers, Investment Regimes, and the Reform Imperative

India’s increasing use of non-tariff barriers, particularly through Quality Control Orders (QCOs), was flagged as another area needing reform. While these are often justified on safety grounds, their opaque implementation hampers trade and deters investment. Mutual recognition agreements and regulatory harmonization with credible global partners like the US FDA were recommended to streamline compliance and enhance trade flows.

Similarly, India’s foreign investment climate came under scrutiny. The collapse of most bilateral investment treaties and the absence of effective dispute resolution mechanisms deter long-term capital. The ongoing EU FTA negotiations were cited as a potential model, but it was emphasized that external trade reforms must be complemented by domestic economic reforms.

Reform or Regress: A “1991 Moment” for Indian Trade?

India may once again be at a 1991-style inflection point—where external pressures create a rare window for systemic reform. Yet, there remains scepticism about India’s historical reluctance to reform without crisis-induced compulsion. Despite passing progressive laws like the 2019 labour codes, implementation remains patchy due to state-level inertia. India’s federal structure—while a strength in many respects—can become a bottleneck for reform, particularly in sectors like land, labour, and logistics.

Four global megatrends were identified as forcing change:

• Fragmentation of the global trade regime
• Disruption and reshaping of global value chains
• Erosion of special treatment for developing countries
• Tightening of geopolitical alignments and expectations

India missed earlier chances to embed itself in global value chains, but new windows are opening, notably with companies like Apple moving production to Tamil Nadu. These are not just commercial shifts but strategic opportunities—ones that must be seized with domestic reform, policy stability, and investor-friendly implementation.

End of Special Treatment and the New Trade Realism

The WTO is now moribund, and the idea of “special and differential treatment” for countries like India is fading. Even emotionally resonant arguments around development are no longer persuasive to trading partners. Reciprocity is the new norm, and India must adapt to this hard-nosed reality. Losing the US GSP benefits is only the beginning of a broader erosion of past privileges.

Labor and environmental standards are increasingly tied to trade agreements, such as the EU’s Carbon Border Adjustment Mechanism (CBAM). While India is relatively well-positioned on environmental metrics, labour remains a vulnerability—particularly on issues like child labour and weak enforcement. Serious introspection and reforms are needed to avoid sanctions and reputational damage.

Geopolitics of Trade: Diversification, Not Desperation

India’s external economic strategy was critically examined. Over-reliance on the US and EU was highlighted, given both regions’ pressure on India to reduce trade surpluses. Simultaneously, India’s trade engagement with ASEAN and China was portrayed as lacklustre or mismanaged. ASEAN’s hesitancy to revise its FTA with India, even while reviewing ties with China, reflects this dissatisfaction.

On a more hopeful note, the Gulf—particularly the UAE—was identified as a trusted and responsive partner. The UAE’s agreements with India can be seen as template models, and Africa’s continental trade framework presents a major, underutilized opportunity for strategic diversification.

India must engage with the US, EU, Gulf, Africa, and even China with a clear-eyed, interest-based approach. The global trade order may be in flux, but India must build internal strength, negotiate from a position of confidence, and avoid overcommitting to any single narrative or framework.

Conclusion: Strategic Realism and the Cost of Hesitation

The session concluded with a candid and unsentimental diagnosis: India’s tendency to delay hard reforms and focus on short-term fixes is no longer sustainable. As global trade rules are rewritten, and the geopolitical and economic stakes rise, systemic reform is not a choice—it is a necessity. India must seize this “1991 moment” not only to stay relevant but to shape the new trade order on its own terms.