lipped from: https://www.thehindubusinessline.com/opinion/editorial/trumping-the-odds/article70457438.ece
After last year’s chaos, 2026 actually looks better
The year 2025 was one of massive geo-political shifts | Photo Credit: Thithawat_s
It might seem droll to say at the dawn of the New Year that ‘when things get really bad, they can only get better’. The year gone by has seen its share of tumult and more, in global trade and geopolitics. The dust could actually settle, as nations adjust to new alliances, adversaries and above all to those who cannot be easily bracketed as friends or foes — such as India.
The mercurial US President Donald Trump is likely to be the top ‘mover and shaker’ for 2026, just as he was in 2025. But he may face a world that is better prepared to deal with his policy of using trade as a weapon to expand US influence — and that includes India which is negotiating a trade deal with the US. Trump has raised average US tariffs from 2 per cent to 18 per cent (50 per cent on India); and whipped up white supremacism to turn away immigrants, including Indian professionals and students. Interestingly, the effects of trade policy on US growth and inflation have not been as drastic as predicted — but that could also have been because of buyers and sellers acting in anticipation. In that case, an increase in US inflation from 2.7 per cent as of November cannot be ruled out. This could impact US growth and markets.
Besides Trump’s calisthenics, there are two big global forces shaping trade, finance and geo-politics: the AI rush and the scramble to secure critical minerals. The AI-driven markets boom betrays a sense of brittleness. A market tremor cannot be ruled out in a highly leveraged industry. Interestingly, US global power rests considerably on its AI dominance, which has emerged as a lever in its tussle with China. China, in turn, derives some of its heft from its critical mineral deposits and near-total control over their processing. The new year affirms paradigm shifts over which there can be no uncertainty whatsoever — the reordering of ‘globalisation’, or global value chains with outsourcing being replaced by ‘near-shoring’; and the threat to rules based trade based on MFN tariffs. As a response, free trade pacts have become de rigeur to secure predictable and reasonable terms of trade. This shall continue in 2026, as nations and blocs, including India seek to broadbase their partners.
The Indian economy seems well prepared to weather shocks. While India’s exports to the US fell 21 per cent between May and November, exports to other destinations picked up 5.5 per cent, indicating that a process of diversification has begun. However, rupee volatility remains a concern; capital inflows have been unreliable in 2025, but this could ease as a new trade and financial normal takes shape. The government should address global governance concerns, such as managing AI with guardrails and enabling a digital transition that checks financial fraud and data theft. Its oversight of civic and environmental issues could improve. Our foreign policy of multi-alignment has seen us through these fractious times. The new year could be one of relative peace — of calm after the storm.
Published on December 31, 2025
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