What are the key features of the emerging G2-driven global economic order dominated by the United States and China?

The G2-driven global economic order refers to the growing dominance of the United States and China in shaping global trade, economic policy, and strategic competition. In recent years, both countries have increasingly adopted mercantilist policies, prioritising national economic interests, strategic industries, and geopolitical leverage rather than multilateral cooperation.The United States has used a range of trade policy instruments to assert its economic interests. These include tariffs imposed under laws such as the Trade Expansion Act (Section 232), the Trade Act of 1974 (Sections 122 and 301), and the Trade Act of 1930 (Section 338). These tools allow the US government to impose tariffs on imports for reasons ranging from national security to unfair trade practices. The recent imposition of blanket tariffs on imports and aggressive economic measures reflects a shift toward unilateral economic action.China, on the other hand, has pursued an export-led development strategy supported by a large manufacturing base and an artificially undervalued exchange rate. Despite declining exports to the US, China’s overall trade surplus in 2025 exceeded $1 trillion, highlighting its continued reliance on manufacturing-driven growth. This strategy has created global imbalances and trade tensions with many countries.Together, the policies of these two major powers are reshaping the global economic landscape. Smaller and middle powers, including India, must navigate this environment carefully by diversifying trade partnerships, strengthening domestic capabilities, and participating in new multilateral trade arrangements.

Why is the current shift in US economic and military policy considered a major source of global uncertainty?

The recent shift in US economic and military policy has become a significant source of global uncertainty because it signals a move away from rules-based multilateralism toward unilateral decision-making. Traditionally, the United States played a leading role in shaping global institutions such as the United Nations, the World Trade Organization, and international financial institutions. However, recent actions suggest a more transactional and unpredictable approach to global governance.One example is the use of unilateral tariffs and trade sanctions under domestic legislation. The imposition of blanket tariffs on imports and threats of penalties against trading partners have disrupted global trade flows and increased tensions between countries. Such policies create uncertainty for businesses, investors, and governments that rely on predictable trade rules. Even when the US Supreme Court declared certain tariffs illegal under the International Emergency Economic Powers Act (IEEPA), alternative mechanisms were quickly used to continue trade restrictions.In addition, US military actions in West Asia without broad international support have raised geopolitical concerns. Conflicts involving major oil-producing regions can cause spikes in energy prices, affecting energy-importing countries like India. For example, disruptions in the Gulf region could threaten India’s energy security and force it to seek alternative suppliers such as Russia.Thus, the combination of aggressive trade policies and geopolitical interventions has increased volatility in the international system. For emerging economies, this uncertainty necessitates a strategy focused on diversification, resilience, and stronger domestic economic foundations.

What factors limit India’s bargaining power in trade negotiations with major powers such as the United States and China?

India’s bargaining power in global trade negotiations is influenced by several structural and economic factors. While India is one of the world’s fastest-growing large economies, it does not yet possess the same level of economic leverage as major powers like the United States or China.Key limitations include:Market power asymmetry: The United States and China command far larger shares of global trade and investment flows.Supply chain dominance: China controls large segments of global manufacturing and critical mineral supply chains.Export concentration: India’s exports are still concentrated in a limited number of sectors such as IT services, textiles, and gems and jewellery.China’s dominance in critical minerals is particularly significant. These minerals are essential for industries such as semiconductors, electric vehicles, and renewable energy technologies. This strategic advantage allows China to exert influence over global manufacturing supply chains.Another factor is India’s large trade deficit with China, which has increased from around $50 billion in 2020 to more than $100 billion today. At the same time, Chinese markets remain relatively closed to many competitive Indian exports such as pharmaceuticals, engineering goods, and IT services.These constraints mean that India must adopt a pragmatic strategy in trade negotiations. Rather than relying solely on bilateral bargaining power, India needs to strengthen its domestic industrial base, diversify supply chains, and expand trade partnerships with multiple countries.

How do recent trade agreements and partnerships illustrate India’s strategy of diversifying its global economic relationships?

India’s recent trade diplomacy reflects a conscious effort to diversify economic partnerships and reduce dependence on any single major power. In an increasingly fragmented global trade environment, India has actively pursued free trade agreements (FTAs) and strategic partnerships with multiple regions.India currently has nine free trade agreements covering 38 countries, which together account for nearly two-thirds of its trade. Recent agreements with countries such as the United Kingdom, Oman, and the European Union demonstrate India’s commitment to deeper economic integration with diverse partners. These agreements open new markets for Indian exports while providing access to advanced technologies and investment.Another important example is the inclusion of India in initiatives such as Pax Silica, which focuses on securing supply chains for critical minerals and artificial intelligence technologies. Such partnerships are strategically significant because they help India reduce dependence on China for key industrial inputs.India has also pursued sector-specific cooperation agreements, such as the energy, uranium, and critical minerals deal with Canada. Despite earlier diplomatic tensions, this agreement highlights India’s pragmatic approach to securing essential resources for its industrial and energy transitions.These examples show that India’s foreign economic policy increasingly focuses on building a broad network of partnerships. This approach helps India hedge against geopolitical risks while strengthening its position in global trade and technology ecosystems.

Critically analyse the implications of China’s export-led growth model for the global economy and India’s trade interests.

China’s export-led growth model has been a defining feature of the global economy over the past few decades. The model relies on large-scale manufacturing, competitive exchange rates, and extensive global supply chains to maintain high export volumes. While this strategy has contributed to China’s rapid economic growth, it has also created significant global economic imbalances.Global implications include:Trade imbalances: China’s trade surplus exceeded $1 trillion in 2025, creating tensions with trading partners.Industrial competition: Low-cost Chinese manufacturing often undercuts industries in other countries.Supply chain dependence: Many economies rely heavily on Chinese intermediate goods.For India, the consequences are particularly significant. India’s trade deficit with China has doubled to more than $100 billion in recent years. Chinese imports dominate several sectors such as pharmaceuticals (active pharmaceutical ingredients), mobile phone components, and solar panels. This dependence exposes India to supply chain vulnerabilities.Furthermore, China maintains restrictions on several Indian exports, including pharmaceuticals and IT services. As a result, trade between the two countries remains heavily skewed in China’s favour.To address these challenges, India must pursue a dual strategy: reducing dependence on Chinese imports while enhancing domestic manufacturing capacity. Initiatives such as Production Linked Incentive (PLI) schemes, supply chain diversification, and stronger trade partnerships with other economies are crucial steps toward achieving this objective.

How can India strengthen its economic and strategic position in a world marked by growing geopolitical competition?

In a world characterised by geopolitical competition and economic fragmentation, India must focus on strengthening both its domestic economic capabilities and its international partnerships. Building internal resilience will allow India to better withstand external shocks and leverage emerging opportunities in the global economy.Key domestic priorities include:Structural economic reforms: Policies aimed at improving ease of doing business, labour productivity, and manufacturing competitiveness.Infrastructure development: Continued investment in transport networks, logistics, and digital infrastructure.Human capital development: Enhancing education, research, and technological innovation.Externally, India must continue to pursue strategic economic partnerships with like-minded countries. Trade agreements with the EU, UK, and other partners can expand export markets and facilitate technology transfers. Participation in emerging trade frameworks such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) could further integrate India into global value chains.At the same time, India must strengthen its defence capabilities and maritime presence, particularly in the Indian Ocean region where geopolitical competition is intensifying. The recent increase in defence spending reflects recognition of these security challenges.Ultimately, India’s long-term success will depend on its ability to combine domestic reform with strategic diplomacy. By doing so, India can position itself as a major engine of global growth in the coming decades.

Suppose rising geopolitical tensions disrupt energy supplies from West Asia. How should India respond to protect its energy and economic security?

A disruption of energy supplies from West Asia would pose a serious challenge for India because the region accounts for a large share of its oil and gas imports. Any escalation of conflict in the Gulf region could lead to sharp increases in global oil prices, higher inflation, and pressure on India’s current account balance.In the short term, India would need to implement energy supply diversification strategies. This could involve increasing imports from alternative suppliers such as Russia, the United States, or African producers. Maintaining adequate reserves in the Strategic Petroleum Reserve (SPR) would also help cushion immediate supply disruptions.In the medium term, India should accelerate investments in renewable energy and energy efficiency. Expanding solar, wind, and green hydrogen projects can reduce dependence on imported fossil fuels. Additionally, strengthening domestic refining capacity and promoting electric mobility would reduce vulnerability to oil price shocks.Finally, diplomatic engagement remains essential. India must maintain balanced relations with major powers and energy-producing regions to secure stable energy supplies. Active participation in multilateral energy forums and strategic partnerships can help ensure long-term energy security.This scenario highlights the importance of combining energy diversification, strategic reserves, and diplomatic engagement to safeguard India’s economic stability in a volatile geopolitical environment.

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Building India’s Economic and Military Strengths in a Disordered World

As global risks escalate, India needs to fortify its economy and military to navigate uncertainty and enhance stability.

Surya

•March 5, 2026•5 mins read

US policies trigger global uncertainty and trade tensions

The global order is currently experiencing high geopolitical and economic uncertainty due to: Aggressive US military and economic policies Trade protectionism Strategic competition between US and China Growing energy insecurity These developments affect global trade, energy markets, and India's economic strategy. 2. US Military Actions...

Building India’s Economic and Military Strengths in a Disordered World

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