Don’t misread U.S. President Donald Trump’s tariff tirades as reckless chaos. This is no global trade war—it’s a calculated masterstroke in geopolitical chess, with India’s Prime Minister Narendra Modi as the key ally. Together, they’ve baited China’s President Xi Jinping into a trap that’s unraveling Beijing’s economic stranglehold. The tariff war has sparked a seismic global realignment, dimming China’s star while India surges as Asia’s new juggernaut.
Trump’s punishing tariffs and Modi’s surgical strikes—like banning Chinese EV titan BYD from India’s $1.5 trillion market—reveal a strategy of ruthless precision. With Russia sidelined,
Asia’s powers pivoting, and China’s retaliation imploding, this tariff tango is rewriting the world order… writes Palak Shah
Xi’s White Flag
Moment
On April 1, 2025, as India and China marked 75 years of diplomatic ties, Xi Jinping spun a poetic fantasy of the “dragon and elephant” dancing together. This wasn’t diplomacy—it was surrender dressed in silk. Xi wasn’t seeking harmony; he was gasping for air. With U.S. tariffs—now a crippling 104 percent on China’s $759 billion exports to America—strangling its trade lifeline, and India siphoning off foreign investment, Xi’s overture was a plea to Modi: Let me breathe.
But Modi didn’t blink. Days after Xi’s olive branch, India slammed the door on BYD, China’s electric vehicle giant eyeing India’s booming market. The ban was not just a snub—it was symbolic of India’s intent: We’re not your partner; we’re your rival. Xi’s dream of a dragon-elephant duet crumbled as Modi doubled down, signaling that India’s rise was meant at China’s expense. The numbers tell the story: China’s global trade share is projected to slide from 15 percent to 12 percent by 2027, while India’s Quad-backed ascent—bolstered by the U.S., Japan, and Australia—shows no sign of slowing.
The Trap Is Sprung
The seeds of China’s isolation were planted when Trump, true to his “America First” rethorics, unleashed reciprocal tariffs on Chinese goods, matching Beijing’s 54 percent average rate with a sledgehammer. China, expecting a one-on-one brawl, hit back with tariffs targeting U.S. agriculture ($50 billion in soybeans alone) and tech. Big mistake. This was the misstep Trump and Modi banked on—a blunder that let India steal the spotlight.
Modi moved like lightning. India slashed interest rates (RBI’s repo rate from 6.5 percent to 5.5 percent), juicing its economy to lure global investors spooked by China’s trade war quagmire. New Delhi is likely to ink trade deals with the U.S., EU, and ASEAN, cutting tariffs on U.S. goods from 17 percent to 10 percent and opening floodgates for exports. While China’s retaliation painted it as a global bully, India is rolling out the red carpet, positioning itself as the stable, open-for-business alternative.
Multinationals, desperate for a “China+1” escape are already pouring in: Apple’s $14 billion iPhone production shift to India in 2024 was just the appetizer—FDI inflows are now projected to hit $100 billion annually, eclipsing China’s $130 billion, which slumped 8 percent in 2023.
China’s tariff tantrum may have backfired spectacularly. Beijing expected allies to rally; instead, it stood alone, its $18 trillion economy wobbling as the world embraced India’s rise. The trap wasn’t just sprung—it was a masterpiece of misdirection.
Asia’s Great Defection
China’s isolation isn’t just economic—it’s regional. Asia’s powers, once cowed by Beijing’s might, are now circling India’s orbit, drawn by Modi’s tariff cuts and a roaring 6-7 percent GDP growth rate. Taiwan, under China’s constant shadow, has zero reason to back a regime rattling sabers at its borders. Its $80 billion trade with the U.S. in 2024 sails smoothly under tariff exemptions, while India’s tech-friendly policies lure Taiwanese chip giants like TSMC, hungry for a slice of India’s $500 billion digital economy.
Vietnam, long a backdoor for Chinese goods dodging U.S. tariffs, is tightening its export rules under Washington’s glare. With a $370 billion export economy, Hanoi can’t afford to side with Beijing and risk secondary tariffs that could kneecap its growth. Similarly, ASEAN heavyweights—Malaysia, Thailand, Indonesia—are betting on India’s $776 billion trade market, projected to hit $1 trillion by 2027. Why cling to China’s $3 trillion export machine, now choking under 104 percent U.S. tariffs and a domestic demand slump (down to 40 percent of GDP)?
Japan and South Korea, Quad allies, are all-in on India. Tokyo’s $20 billion investment pledges and Seoul’s tech partnerships are fueling India’s rise, while China’s Belt and Road empire—spanning 130+ countries—loses its luster. Beijing’s regional clout is fading as Asia hedges against a tariff-crippled giant, leaving China to face the music alone.
China’s Failed Counterpunch
China’s decision to fight fire with fire was its undoing. While the EU and India negotiated tariff reductions, Beijing escalated, slapping 25 percent duties on $110 billion in U.S. goods in 2018 and expanding them since. This lone-wolf retaliation branded China as the trade war’s villain, handing Trump and Modi a narrative coup: China disrupts; India delivers.
The U.S. tightened the screws, enforcing chip bans since 2022 and auditing transshipment hubs like Vietnam and Malaysia, where Chinese goods once dodged tariffs. Circumvention—rerouting $759 billion in U.S. exports via third countries—now tacks on 5-15% costs, gutting China’s edge. The U.S. Customs Service, once outmaneuvered, is now a pitbull, levying $1.8 billion in fines on violators. China’s economy can take punches, but its global trade share—down from 15% to a projected 12-13%—is bleeding out, while India’s $450 billion export engine roars ahead, eyeing 15% growth.
India’s Meteoric Rise
India’s tariff gambit has launched it to Asia’s summit. Lower rates are set to ignite a NIFTY 50 rally—20-30 percent upside to 30,000-32,500 in 18 months—led by banking titans (HDFC, ICICI), infrastructure behemoths (Reliance), and IT powerhouses (TCS, Infosys). Exports ($450 billion in 2024) are primed to surge, with pharmaceuticals ($30 billion) and textiles ($40 billion) flooding U.S. shelves. A weaker rupee (90-95 USD/INR) makes Indian stocks a magnet for foreign investors, with FPI inflows projected to top $60 billion in 2025, up from $50 billion in 2023.
Modi’s trade deals—U.S., EU, ASEAN—cement India’s “China+1” crown. U.S. imports from India ($105 billion in 2024) are climbing 10 percent annually, while China’s U.S. share has cratered 20% since 2022. The Quad’s muscle—Japan-India trade up 20% to $25 billion—boxes in China geopolitically. ASEAN, wary of Beijing’s chokehold via RCEP, sees India’s $150 billion trade as a counterweight. India isn’t just ascending—it’s redrawing Asia’s power map, with Modi as the architect.
China’s Clipped Wings
The tariff trap has grounded China’s juggernaut. Its export-led growth—once a $3 trillion steamroller—faces a triple threat: U.S. tariffs, India’s trade diversion, and Asia’s defection. Global giants, from Tesla to Foxconn, are rerouting billions to India, slashing China’s FDI edge ($130 billion and falling). Domestic consumption, at 40 percent of GDP, can’t plug the gap—$759 billion in U.S. exports are on the chopping block.
Beijing’s counterattacks are flailing. Dumping steel risks U.S. escalation; leaning on Russia or Iran yields little—Moscow’s $240 billion trade with China is dwarfed by its own survival needs. Circumvention is a costly dead end, and retaliatory tariffs only tighten the noose. China’s not broken, but its global dominance is dented, its trade empire shrinking as India’s could soar. The dragon’s roar is a whimper now and will soon be lost in India’s thunder.
Russia Lifeline Is Dead
Beijing’s dream of a Moscow lifeline is dead on arrival. Russia, battered by Western sanctions and a brutal war in Ukraine, is too weak to play China’s wingman. Its $240 billion trade with China in 2024 is critical, but survival trumps sentiment. With India offering tariff-friendly deals and $150 billion in ASEAN trade, Moscow sees more upside in neutrality than backing a tariff-bruised Beijing.
Sanctions have choked Russia’s economy (GDP growth limping at 1-2 percent), and Putin can’t risk alienating India or the West further by jumping into China’s trade war mess. Modi’s Quad alignment—U.S., Japan, Australia—makes India a sweeter bet. Russia’s $10 billion energy deals with India and arms exports signal a pragmatic pivot, leaving China to fight its battles solo.
The Verdict: A New World Order
Trump and Modi didn’t just outfox China—they flipped the global chessboard. The BYD ban, Xi’s desperate tango plea, Russia’s sidestep, and Asia’s pivot lay bare Beijing’s solitude. By luring China into retaliatory overreach, the Trump-Modi duo has exposed Xi’s isolation, rallied Asia to India’s side, and slowed China’s economic sprint to a crawl.
India, with its tariff cuts and 6-7 percent growth, emerges as Asia’s linchpin, its $776 billion trade market a magnet for global wealth. China, battered but not broken, licks its wounds, its trade share eroding as its clout frays. The tariff war’s biggest loser? The dragon who thought it could fight alone. This isn’t just a trade win—it’s a geopolitical rout. Modi’s iron resolve and Trump’s tariff hammer may have crowned India as Asia’s titan, while China’s global stride stumbles. The dragon’s learned the hard way: in this arena, you don’t fight the trap—just devour it.
The author is India’s veteran financial market journalist.