The calm before the storm of 2026? (AI generated)
Digital Desk, New Delhi. The year 2025 started with the fear that there would be a global crisis which would engulf India too. There was a threat of a global trade war if Trump became president for the second time, which was expected to cause a stock market crash and a recession in the economy. But this did not happen, let us know why?
The first reason for this is that Trump's words were bigger than his actions. Earlier, the US President's statements were considered policy commitments, which changed in the year 2025. Trump announced major measures, then postponed them or withdrew them altogether.
He was seen more as a businessman than a politician, who would start negotiations at a very high price but eventually settle for a very low one. This was most evident in the case of China. Trump started with aggressive rhetoric and threats of 150% tariffs on Chinese goods, but he soon ran into tough times. Tariffs that high would have destroyed trade with China, and America needed its cheap consumer goods.
China weaponized virtual world monopoly
Additionally, China weaponized its virtual world monopoly in rare earth exports, which were essential to American manufacturing and defense. American corporate leaders also protested. Nvidia's chief and other tech executives rightly said the Chinese AI market was too big to leave to American companies. Trump backed down.
Trump's threats had no effect
Trump started the year with threats of major reciprocal tariffs that were neither reciprocal nor based on economic logic. His definition of "unfair trade" was simply any country that ran a surplus with the US, which went against basic economics. Fears of trade retaliation by Europe, Japan and others led to a massive selloff in global stock markets. But the tariffs ultimately imposed were much more modest than those threatened.
Trump imposed tariff on India
When it became clear that Trump's initial remarks were a bargaining chip, markets stabilized. India was an exception. Trump imposed 50% tariffs, half of which was meant to pressure India to stop buying Russian oil. These tariffs did not cause massive inflation in America. American companies had stockpiled low-duty imports months in advance in anticipation of higher tariffs. Many Chinese exports were quietly routed through third countries, a mysterious but well-known method of trade diversion.
US sanctions on oil imports from Russia were gradually imposed and only became truly stringent in late November. Where tariffs had an impact, the burden was shared. Chinese and Indian exporters bore part of the cost, American importers took on the other part, and the rest was passed on to consumers. However, over time, the full tariff will be passed.
Slight decline in China's growth
According to official data, there has been only a slight decline in China's growth. Across Asia, countries that faced disruptions to trade, such as Vietnam, the Philippines, and Indonesia, quickly adapted and continued to grow. India is not alone in ignoring tariff shocks. However, India's performance has been exceptional. Its long-term growth trend has been 6.5% annually.
Increase in India's GDP
The government had estimated that Trump's tariffs could reduce GDP growth by 0.5%. Instead it has increased, averaging 8% in the first two quarters of this fiscal year. Chief Economic Advisor V Ananth Nageswaran is right in suggesting that India has moved towards a new, higher growth trend of more than 7%.
Rise of GCC in India
India's high growth is a combined effect of many different reforms in the last few years. The most striking development has been the rise and development of Global Capability Centers (GCCs). US giants Google, Amazon and Microsoft have announced plans to invest a total of $67.5 billion in new GCCs, including infrastructure and development for AI.
There is a shortage of STEM (Science, Technology, Engineering, Mathematics) graduates in MNCs across the world and India is the largest supplier except China. It is upskilling Indian talent at the global level, which will impact the entire economy as GCC staff will later be hired by Indian companies.
All that can be said now is that the year 2025 should be the calm before the storm. Which may be visible in 2026.
Also read- The world is recognizing the strength of the minds of Indians, India has become the new brain hub for global companies.