Global Trade War

📌 Background & Key Features

• Escalation timeline: Building on US-China trade tension since 2019, the second Trump administration imposed sweeping "reciprocal" tariffs in April 2025 on allies and rivals alike — 20% on Japan/EU, 30% threatened on Mexico, and eventually a headline 50% on India.
• Impact channels: Trade diversion (US imports shifting from China to Vietnam, India, Taiwan, Mexico), an average ~$1,500-2,800 per-household US tax burden, and accelerated "de-risking"/regionalisation of global value chains.
• India’s response: Pursued WTO complaint routes, diversified trade partnerships, and accelerated FTA negotiations — most notably concluding the landmark India-EU FTA (January 2026), creating the world’s largest free-trade zone (~2 billion people, ~25% of global GDP), alongside FTAs with the UK, Oman and New Zealand.

📋 Quick Facts

📰 Current Affairs Linkage (2025-26)

• The 2025-26 US-India tariff crisis was, per reports, aggravated by India’s refusal of US mediation offers during the Pahalgam/Operation Sindoor crisis and by India’s continued Russian oil imports and BRICS participation.
• US Supreme Court (Feb 2026) ruled that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) exceeded presidential authority, injecting fresh uncertainty into the administration’s trade strategy.
• China’s use of rare-earth export leverage has emerged as a new front in the trade war, directly affecting India’s industrial supply chains (see Part 2, China section).

📝 PYQs for Practice (Mains)