The aggressive tariff policy followed by the US president is shaking up the world economy, old alliances and the old world order. President Trump has not only imposed tariffs on its trading partners but has also blocked the WTO's rules, shattering the institution. He is pushing for the purchase of Greenland while regularly striking India through policy initiatives or statements. ‘America First’ policy and Trump’s MAGA are cracking the global order and alliances. In the case of Europe, the issue of Greenland is becoming a bone of contention among the NATO partners (the US and the European countries). His policy choices are ransacking and negatively affecting the trade, alliances and trust everywhere. This move by Trump would have broader consequences for the world, the US and the US dollar in the coming days.
Tariffs Demolish WTO Rules
The US President Trump's 2025 tariffs are going completely against the WTO rules. The US is ignoring WTO limits as per WTO rules on non-discrimination and fair disputes. The WTO's Appellate Body, the dispute settlement body of the WTO, has been in crisis since 2019. The US has blocked the appointment of new judges, raising the issue of overreach and sovereignty. This has weakened the Appellate body, and as a result,t the unilateral tariffs imposed by the US remain unpunished. China has filed complaints against the US challenging the US tariffs, but nothing happened, and nothing is expected to be enforced because ofthe dominant position of the US in the WTO. It is pushing other countries to opt for solo protectionism and focusing bilateral and regional alliances. This has led to friendshoring. As per the UN forecast, post-Trump’s tariffs, the global growth has dipped to 2.7% in 2026.Greenland Plan Strains Europe and NATO
Trump’s insistence on buying Greenland at any cost is leading toward huge realignment in Europe. Post Venezuela, European countries are now assessing their relationship with the US and their position in the security organisation, NATO. Trump’s threats of 10% tariffs on Denmark, Sweden, France, the UK, the Netherlands, and Finland from February 2026 are further complicating things in Europe. The tariff is expected to rise to 25% for these countries. European leaders like Macron are terming these tariffs ‘unacceptable blackmail’. Many countries in Europe are backing Denmark's claim of self-rule in Greenland. These developments are risking US-EU trade pacts and relationships.India’s Trade to Experience Pain
The US has slapped 25% tariffs on Indian goods. There is a threat of 500% on Indian goods. India has hit back with duty of 30% duties on US pulses. There have been many rounds of trade talks, but they are being stalled time and again. Meanwhile, the Trump administration has pulled the US out of 66 global bodies, which includes India's solar alliance. This recent move of imposing 500% tariffs on Indian goods through a bill put in the US Congress and withdrawal from different global bodies are leading to more confrontation despite claims of de-escalation.Bigger Cracks in the World Order
The Trump Administration is pulling out of different agencies of the UN and other global and multilateral bodies. Meanwhile, the tension between the US and China, as well as the US and the EU, is rising. This leads to increased uncertainties and risks. The European Union is exploring the possibilities of using ‘trade bazooka’, the EU’s anti-coercion instrument, to counter the US coercion. At the same time, India is weighing BRICS along with Brazil, China and Russia. Tariffs are resulting in decelerating world GDP growth, increased prices, and a fractured post-WWII world order that was built on the ideology of free trade. Allies are feeling betrayed. This sparks loops of retaliation that no one wins.Opportunities for India
Trump has completely shattered the world order and trust that the US had across the globe, which cannot be restored. The countries are exploring all possible avenues of trade and relationships to bring down their respective economic uncertainties and risks. This situation offers an opportunity for India if India plays its cards tactfully. Post the tariff episode, the dominance of the US economy and the US dollar will certainly fall as bilateral and regional trades and relationships become more dominant. This would force the world to go through realignment and a new world order. In the new world order, when it comes into force, India will be more dominant than today’s WTO and UN. Perhaps this is the reason why the Indian government has increased foreign policy activities across the globe.Dr Rajeev K Upadhyay
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