Trump 2.0 Shock: More Turmoil Soon
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MARCH 2025
The global economic order is undergoing a significant transformation, characterized by rising geopolitical tensions, trade disruptions, and declining trust in long-standing institutions.
At the centre of this turmoil is Trump 2.0 presidency, bringing with it, protectionist policies with trade war out in the open, a dramatic shift away from multilateralism.
This development presents a unique scenario, highlighting the intersection of international political economy, geostrategic alliances, and economic stability.
The United States as a Disruptor
Historically, the United States has played a pivotal role in shaping and sustaining the liberal international order, particularly after World War II.
However, Trump’s 2.0 policies signify a marked departure from this legacy.
The "America First" and “Make America Great Again” doctrine has led to trade protectionism,
which in turn has led to diplomatic rifts with traditional allies like Britian, France, Germany and Japan, and a probably it’s questionable role in global governance.
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...Trump’s 2.0 policies signify a marked departure from this legacy
This shift raises fundamental questions about the nature of hegemonic stability and whether the US can regain its credibility as a global leader after Trump’s tenure.
From a political science perspective, Trump’s actions can be analyzed through the lens of realism, which emphasizes power politics and national interest over international cooperation.
The erosion of trust in U.S leadership reflects a broader decline in liberal institutionalism,
which has traditionally relied on norms, cooperation, and economic interdependence to maintain global stability.
The U.S-China Economic Conflict
A major consequence of Trump’s return to power is the intensification of economic and political tensions between the US and China.
Since 2010, these two countries have collectively accounted for over 40% of global GDP growth.
However, Trump’s tariff escalations and efforts to decouple supply chains signal a fundamental restructuring of the global economic order.
China, with its state-driven economic model, may attempt to mitigate the immediate impact of these policies.
Yet, structural weaknesses such as its reliance on exports and insufficient domestic consumption present significant challenges.
From a theoretical perspective, the US-China rivalry can be examined through power
transition theory, which posits that rising powers (China) will challenge established hegemonic powers (US), leading to periods of instability and conflict.
Implications for Europe and the Global Economy
The ramifications of the Trump shock extend far beyond the US and China.
Europe, which accounts for approximately 14% of global GDP, faces increasing economic strain due to heightened trade restrictions and weakened transatlantic ties.
While geopolitical frictions may encourage greater European strategic autonomy, such adjustments require time and substantial policy shifts.
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...to decouple supply chains signal a fundamental restructuring of the global economic order
Meanwhile, the global economy is unlikely to find an immediate substitute for lost growth momentum.
India, often cited as a potential economic powerhouse, still represents only 8.5% of global GDP in purchasing power parity terms and (India) lacks the structural capacity to replace the economic weight of the US or China in the near term.
Indian Response to Trump’s Tariff Politics
It is unclear what stance the Indian government intends to take in response to Trump’s tariff threats.
Trump’s strategy involves imposing different tariffs on different countries to prevent a collective opposition to his policies.
In response, the Indian government announced a 2% tax reduction in the 2025 budget,
followed by a further 6% reduction in the digital service tax, a move widely perceived as benefiting American companies like Google.
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...(India) lacks the structural capacity to replace the economic weight of the US or China...
The opposition remains sceptical of these seemingly arbitrary tax cuts, questioning whether the Indian government is yielding to pressure from Donald Trump.
So far, there has been no public discussion in Parliament regarding India’s official response to the US tariff regime.
In the realm of geopolitics, several nations are forming alliances to counter Washington’s unilateral tariff policies. However, India has not yet joined this informal consortium.
For example, Canada and European Union leaders have openly responded to Trump’s tariffs while keeping their respective parliaments informed.
This level of transparency is lacking in India, as Parliament has yet to deliberate on the issue.
Oil-producing nations have started coordinating their responses to global trade challenges.
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...whether the Indian government is yielding to pressure from Donald Trump
Similarly, India should consider forming alliances with other countries that export agricultural goods, textiles, and industrial products to the US.
It is feared that the ongoing tariff war is so severe that it could significantly weaken the Indian economy.
At a time when India is already struggling to revive its growth momentum, a trade war with Trump is the last thing it needs.
Therefore, Parliament must be consulted to ensure that India takes a firm and united stance—one that is both strategic and courageous.
Forecasting the Fallout
The current projections for global economic growth, standing at approximately 3.3% for 2025-26 according to the International Monetary Fund (IMF), appears overly optimistic given the existing economic disruptions.
Political economy scholars recognize that economic downturns of this scale often have far-reaching political consequences, including increased populism, shifts in electoral behavior, and greater geopolitical instability.
Trump’s planned tariff escalations, set to be announced on April 2, add an additional layer of complexity.
These policies are expected to raise production costs, disrupt supply chains, and contribute to stagflation—a combination of stagnant economic growth and rising inflation.
From an economic nationalism like “America First” and “Make America Great Again”
standpoint, such measures by Trump reflect an attempt to reclaim economic sovereignty, though at the cost of increased global economic disruptions.
Perspective on Disruptions
The Trump shock is not merely an economic event but a profound political transformation with global implications.
It challenges existing theories of international relations, tests the resilience of global economic institutions, and reshapes power dynamics between major global actors.
These real-world scenarios provide a compelling case of new world order where the political
and economic theories are being rewritten, from realism and transition of power theory to the political economy of trade and globalization.
With continued turmoil since beginning of Trump 2.0, key questions remain:
Can the US rebuild its lost credibility in global governance?
Will China successfully pivot to a more consumer-driven economy?
And what role will emerging powers like India play in the future global order?
The answers to these questions will shape the theories and trajectory of international politics for years to come.
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