The New Cold War: Trump’s Tariff Strategy, US National Interests, and India’s Rise in the Global South

Executive Summary

The escalating rivalry between the United States and the People’s Republic of China, often described as a "new cold war," is reshaping global economic and geopolitical landscapes. At the heart of this conflict are tariffs, which have reached unprecedented levels, with the US imposing up to 245% on Chinese goods and China retaliating with 125% on US imports as of April 2025. These measures, driven by President Donald J. Trump’s “America First” policy, aim to protect US national security, reduce trade deficits, and counter China’s unfair trade practices. Amid this superpower struggle, India is positioning itself as a leader of the global south, potentially forming a third geopolitical bloc. This report examines the tariff dynamics, their economic and geopolitical implications, India’s strategic role, and the responses of other major powers, emphasizing the United States’ strategic advantage under Trump’s deal-making diplomacy.

Tariffs: The Cornerstone of US Economic Strategy

Definition and Strategic Role

Tariffs are taxes levied on imported goods, designed to protect domestic industries, generate revenue, or exert geopolitical pressure. In the US-China trade war, tariffs are a primary tool of economic strategy, aimed at correcting trade imbalances, safeguarding national interests, and countering China’s unfair trade practices, such as intellectual property theft and currency manipulation (White House). The United States, leveraging its position as the world’s leading economy, has deployed tariffs to strengthen its industrial base and reduce reliance on Chinese manufacturing, aligning with President Trump’s vision of economic self-reliance (Politico).

Current Tariff Dynamics

As of April 2025, the trade war has intensified significantly. The United States has imposed tariffs on Chinese goods with rates reaching up to 245%. These tariffs, combined with earlier duties, result in effective rates as high as 245% on some products (The New York Times). China has retaliated, escalating tariffs to 125% on all US imports, effective April 11, 2025, up from 84% earlier in the month (Bloomberg).

The escalation timeline is as follows:

• February 2025: US tariffs on Chinese imports increased by 10%, targeting goods linked to fentanyl production (White House).
• March 4, 2025: China imposed 15% tariffs on US agricultural goods, escalating tensions (Al Jazeera).
• April 2, 2025: US tariffs rose to 54% on Chinese imports, declared as “reciprocal tariffs” to address trade deficits (White House).
• April 9, 2025: US tariffs reached 145% on Chinese goods, prompting global market volatility (CNBC).
• April 11, 2025: China escalated to 125% tariffs on all US goods, calling US actions a “joke” (Bloomberg).
• April 16, 2025: US tariffs rose to 245%, making the trade war more aggressive.

This rapid escalation reflects the US’s commitment to protecting its economic interests and China’s determination to resist external pressure. The Trump administration views these tariffs as a necessary response to China’s retaliatory measures and a strategic tool to reshape global trade dynamics (White House).

Economic Impacts

The economic consequences are multifaceted. In 2024, the US imported $439 billion in goods from China while exporting $143.5 billion, resulting in a $295 billion trade deficit (Al Jazeera). The tariffs are projected to increase US household costs by approximately $1,300 in 2025, according to the Tax Foundation. For China, the tariffs threaten export-driven growth, with analysts forecasting a 1.5 to 2 percentage point economic slowdown in 2025 (Al Jazeera).

Globally, the trade war is expected to reduce merchandise trade by 0.2% (Wikipedia). Chinese firms are diversifying supply chains, targeting markets in Europe, Saudi Arabia, and Russia, as observed at the Canton Fair in April 2025 (The New York Times). These shifts could elevate global prices and disrupt supply chains, particularly for technology and consumer goods. However, the US, with its robust domestic market and global financial influence, is better positioned to absorb these shocks compared to China, which relies heavily on export markets (Foreign Affairs).

Table 1: Economic Impacts

Strategic Rationale for US Tariffs

The United States, under President Trump’s leadership, has articulated a compelling case for the necessity of these tariffs, rooted in national security, economic resilience, and the protection of American workers. These measures align with Trump’s “America First” policy and his deal-making approach, as outlined in his book, The Art of the Deal, which emphasizes using leverage to secure favorable outcomes.

Safeguarding National Security

On April 2, 2025, President Trump declared a national emergency, citing foreign trade practices that have led to persistent trade deficits, hollowed out the US manufacturing base, and rendered critical supply chains dependent on adversaries like China (White House). The tariffs address this threat by incentivizing domestic production and securing supply chains for critical minerals, such as rare earths, which China recently restricted (White House). This move ensures the US defense-industrial base remains independent and robust.

Countering Unfair Trade Practices

The US has long accused China of unfair trade practices, including currency manipulation, intellectual property theft, and forced technology transfers. These practices have disadvantaged American companies and workers, contributing to the $295 billion trade deficit in 2024 (Al Jazeera). The tariffs are designed to pressure China into adopting fairer trade policies, protecting US industries from subsidized Chinese goods and leveling the playing field for American businesses.

Protecting and Creating American Jobs

The Trump administration argues that tariffs protect American jobs by making imported goods more expensive, encouraging consumers to buy domestically produced products. A White House article, “Tariffs Work — and President Trump’s First Term Proves It,” cites a 2024 study showing that tariffs during Trump’s first term strengthened the US economy and led to significant reshoring in industries like manufacturing and steel production (White House). By April 2025, these policies are expected to stimulate further job creation in key sectors, reinforcing the US’s industrial leadership.

Leveraging “Art of the Deal” Diplomacy

Trump’s tariff strategy embodies his “Art of the Deal” philosophy, using economic leverage to negotiate better trade agreements. By imposing high tariffs, the US creates pressure on China and other trading partners to offer concessions, such as reduced tariffs or increased market access for US goods. This approach has already prompted over 75 countries to reach out for new trade deals, according to the White House (White House). Trump to pause tariffs on some countries for 90 days, while maintaining high rates on China, demonstrates a calculated strategy to maximize US negotiating power (Al Jazeera).

Alignment with US National Interests

The tariffs serve US national interests by reducing economic dependence on China, strengthening domestic industries, and enhancing global trade leverage. They address the trade deficit, protect critical technologies, and ensure the US remains a leader in the global economy. While critics argue that tariffs increase consumer costs, the administration contends that these short-term sacrifices are necessary for long-term economic security and prosperity, a view supported by industry leaders like the Coalition for a Prosperous America (White House).

Geopolitical Implications

The trade war is a central element of a broader “new cold war,” characterized by technological rivalry, military posturing, and ideological competition. The US and China are decoupling their economies, a process that could fragment global trade networks and increase inflation (The Diplomat). This decoupling extends to technology, with both nations vying for dominance in semiconductors, artificial intelligence, and 5G infrastructure.

The global south—developing nations in Asia, Africa, and Latin America—faces significant challenges. These countries rely on trade with both superpowers, and escalating tariffs could raise costs and limit market access. Some may align with one side, while others pursue neutrality to maximize economic benefits, fostering a multipolar world where alliances are fluid and strategic autonomy is valued (Real Instituto Elcano).

The United States, with its extensive network of alliances and leadership in international institutions, is well-positioned to shape this emerging order. Its ability to rally partners in the Indo-Pacific and Europe strengthens its strategic posture, contrasting with China’s more isolated position, despite its economic outreach (CSIS).

India’s Leadership in the Global South

Strategic Positioning

India is emerging as a pivotal leader of the global south, a coalition of developing nations grappling with poverty, climate vulnerability, and infrastructure deficits. Through initiatives like the Voice of Global South Summits, India has amplified these countries’ concerns. The third summit, held virtually in August 2024, emphasized unity and equitable global governance, with 123 countries participating (Vision IAS).

India’s strategy includes:

• South-South Cooperation: Bilateral trade agreements and development assistance in Africa and Latin America, including a $2.5 million fund for trade promotion (Vision IAS).
• Multilateral Advocacy: Leadership in BRICS and G77 to reform global governance structures.
• Soft Power Projection: Vaccine diplomacy during COVID-19 and significant UN peacekeeping contributions.

At the 18th Pravasi Bharatiya Divas in January 2025, Prime Minister Narendra Modi reaffirmed India’s commitment to the global south (ForumIAS). India’s G20 presidency in 2023 highlighted its role as a bridge between the global north and south, advocating for climate financing and debt restructuring (Foreign Policy).

Challenges and Opportunities

India faces formidable competition from China, which has over a dozen free trade agreements with global south nations and extensive infrastructure projects via the Belt and Road Initiative (Council on Foreign Relations). India’s trade with China, valued at $136 billion in 2023, is heavily imbalanced, complicating its leadership ambitions. Domestic resource constraints and the need to maintain strategic autonomy while engaging with the US, Russia, and China further challenge India’s aspirations (Chatham House).

Nevertheless, India’s leadership could establish a “third pole” in global politics, offering an alternative to the US-China dichotomy. Its success depends on fostering unity among global south nations and leveraging its growing economic and diplomatic influence. The US, recognizing India’s strategic importance, has deepened ties through frameworks like the Quad, enhancing India’s role as a counterbalance to China (The Diplomat).

Potential Outcomes: US Strategic Advantage

Predicting a definitive “winner” in the US-China cold war is complex, spanning economic, military, and soft power dimensions. The United States remains the preeminent global power, with unmatched military capabilities, a robust network of alliances, and leadership in international financial systems. President Trump’s tariff strategy has positioned the US to exert significant pressure on China, which faces internal challenges, including a property market slump and high youth unemployment, with projected 2025 growth at 3.4% (NPR).

India’s leadership in the global south could elevate its global standing, potentially positioning it as a counterbalance to both superpowers. However, India’s economic and military capabilities trail those of the US and China, and its leadership role remains nascent (Next IAS). The global south, while influential if united, is hindered by diverse interests and resource constraints.

The evidence suggests a multipolar world with distributed influence, but the US holds a strategic advantage. Trump’s “Art of the Deal” diplomacy, using tariffs as leverage, has prompted global trade partners to seek negotiations, reinforcing US dominance (White House). The US’s military superiority, global alliances, and economic resilience position it to shape the emerging global order effectively (Vision of Humanity).

Reactions of Other Major Powers

China’s Strategic Response

China is employing non-tariff measures, including export controls on rare-earth minerals and antitrust probes against US firms like DuPont and Google (CNBC). It is also strengthening ties with the global south and the EU, as seen in engagements at the Boao Forum for Asia in March 2025 (The Guardian). President Xi Jinping’s call for EU cooperation against US “bullying” signals a broader diplomatic strategy (The Conversation).

Russia’s Opportunistic Positioning

Russia could capitalize on the US-China rift, potentially resetting ties with the US while maintaining its alliance with China through the Shanghai Cooperation Organization (RAND). This dual alignment could enhance Russia’s influence in the Indo-Pacific, leveraging its strategic interests to navigate the multipolar landscape.

EU’s Strategic Autonomy

The EU is balancing economic ties with China and security alignments with the US. The trade war has heightened recession fears, with JP Morgan estimating a 60% chance by year-end (The Guardian). The EU is likely to pursue strategic autonomy, diversifying trade partners to mitigate risks while maintaining its transatlantic partnership (CNN).

Indo-Pacific Allies’ Hedging Strategies

US allies like Japan, South Korea, and Australia, part of the Quad, face pressure to align with Washington while preserving economic ties with China. Japan and South Korea have significant trade dependencies on China, while Australia’s economy relies on Chinese demand for resources. These nations are adopting hedging strategies, strengthening security ties with the US while maintaining economic relations with China (The Diplomat).

Table 2: Major Powers’ Responses

Conclusion

The US-China trade war, marked by tariffs of 145% and 125% respectively, is a defining feature of the new cold war, with profound economic and geopolitical consequences. President Trump’s tariff strategy, rooted in his “America First” policy and “Art of the Deal” diplomacy, is a calculated move to protect US national interests, reduce trade deficits, and counter China’s unfair trade practices. By leveraging economic pressure, the US is reshaping global trade dynamics, prompting negotiations with over 75 countries and reinforcing its strategic advantage.

India’s leadership in the global south offers a potential third pole, but its success is constrained by competition with China and domestic challenges. Other major powers, including the EU, Russia, and Indo-Pacific allies, are navigating this conflict with caution, balancing economic and security interests. While the future is likely to be multipolar, the United States, under Trump’s leadership, holds a strategic edge due to its military power, global alliances, and economic resilience. As this new global order emerges, the US is well-positioned to lead, ensuring long-term prosperity and security for the American people.