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US President Donald Trump’s economic team is rapidly advancing a new global strategy to box in China – not just with tariffs, but with alliances. At the center of this plan? India.
Treasury secretary Scott Bessent, emerging as Trump’s surprise lead negotiator, has outlined what insiders are calling a “grand encirclement” – a diplomatic and economic coalition with India, Japan, Vietnam, and South Korea to isolate Beijing and weaken its grip on global trade, a Bloomberg report said.
“They’ve been good military allies, not perfect economic allies. At the end of the day, we can probably reach an agreement with them. Then we can approach China as a group,” Bessent said.
Why it matters
- This isn’t just about economics – It’s geopolitics in disguise. Trump’s escalating tariffs on China (some over 140%) are the stick. His 90-day tariff pause on other nations, is the carrot – a window to strike deals that would redirect trade, realign allies, and squeeze Beijing. And India may be the crucial swing partner in that vision.
- Strategic realignment: Trump’s economic team, led by Scott Bessent, sees trade deals not just as economic tools, but as geopolitical weapons. The goal is to redraw global supply chains to make them less China-dependent – and bring key players into a US-led economic sphere. India, with its massive market, anti-China instincts, and ambitions to be a global power, is uniquely positioned to anchor this pivot.
- A hedge against Beijing: By forging deeper ties with countries surrounding China – like India, Vietnam, South Korea, and Japan – Trump’s team hopes to economically encircle Beijing without needing traditional alliances. India’s rejection of Chinese firms like BYD, alongside its courting of Tesla and the US, underscores this quiet but calculated alignment.
- Decoupling with leverage: Trump’s 90-day pause on new tariffs gives the US leverage. Countries that sign deals to buy American goods, block transshipment of Chinese products, and raise their own tariffs on China can escape the wrath of US duties. India, already under pressure to diversify trade and boost exports, sees this as a window to gain favorable access – while asserting its own national interests.
- Zero-sum trade meets grand strategy: Trump’s instinct remains transactional. But Bessent’s vision – and India’s strategic posture – suggest something broader: A long game that repositions US economic leadership not just through tariffs, but through carefully cultivated alliances that push China to the margins.
- India’s moment: With Europe waffling and Southeast Asia wary, India could emerge as the indispensable nation for Trump’s trade doctrine. It’s the only major economy large enough, skeptical enough of China, and independent enough from the US to act as both a partner and a pivot.
Zoom in: India’s pivotal role
India’s posture is shifting from transactional to strategic.
Officials in New Delhi confirmed they’re working on a comprehensive bilateral trade agreement (BTA) with the US — one that spans digital trade, goods, labor mobility, and more.
But don’t expect a “zero-for-zero” tariff deal – Indian negotiators insist that kind of parity is only realistic between developed economies, a report in the Economic Times said.
Instead, India is exploring a “package deal” approach, offering sector-specific concessions on textiles, gems, chemicals, and agriculture in exchange for US market access and tech collaboration.
India’s domestic policy aligns well with Trump’s goals:
- It has rejected multiple Chinese investment proposals, including a $1B EV plant by BYD, a Bloomberg report said.
- It maintains 100% import duties on fully built cars — among the highest globally — shielding local players like Tata and Mahindra.
- It’s tightening checks on trade routes from Sri Lanka, Oman, and UAE to stop Chinese goods sneaking in through back doors.
“India has a lot of elbow room for trade deals with developed nations,” commerce minister Piyush Goyal said. “But we must be cautious about dumping from China.”
What they’re saying
- “India has to be cautious about its strategic interests, who we allow to invest,” Goyal told Bloomberg, directly referencing Chinese firms.
- Meanwhile, White House insiders say deals with India are progressing faster than with other countries, thanks in part to shared concerns over China and India’s relatively low exposure to US tariffs.
- “Everybody wants to come and make a deal,” Trump said last week. “The biggest problem [my aides] have is they don’t have enough time in the day.”
Between the lines
India isn’t acting purely out of goodwill – it’s hedging.
While aligning with the US, India remains deeply interwoven with Chinese supply chains. Roughly 40% of Vietnam’s imports, for example, come from China – a number similar to India’s for electronics and machinery.
India also seeks to replace Chinese e-commerce exports to the US, particularly as Washington slaps over 120% duties on low-value shipments from China starting May.
A report by Delhi-based think tank GTRI calls this a “massive opportunity” for India’s small businesses, handicraft exporters, and fashion sellers – if the government can streamline red tape.
The European wrinkle
The EU is not on board – at least not yet. President Trump’s blanket tariffs, even on allies, have deeply alienated European leaders. French President Emmanuel Macron says the EU faces $59 billion in annual tariffs from Washington — nearly equal to three years of US military aid to Ukraine.
Spain’s Prime Minister Pedro Sánchez has publicly flirted with a China pivot, prompting a rebuke from Bessent. European Commission president Ursula von der Leyen is pushing for a mechanism to monitor Chinese trade diversions, but Brussels still appears hesitant to side fully with Washington.
“Friends and foes are being treated the same,” said Jeppe Kofod, Denmark’s former foreign minister. “It’s crazy time.”
The challenge
Trump’s allies aren’t exactly on the same page. Bessent is pitching a unified front. But other top officials, like Peter Navarro and Commerce secretary Howard Lutnick, are focused less on long-term strategy and more on short-term manufacturing wins and tariff cash flow.
“The key question is if they start making performative deals to help some particular company, or if they focus on meaningful commitments to rebalance trade,” Lori Wallach of Rethink Trade told the Washington Post.
Trump’s White House often struggles to speak with one voice. In private, even administration officials admit they don’t always know what the president is aiming for.
“There’s no idea what they want from other countries, and worse is that other countries don’t know what Trump wants from them,” said Doug Holtz-Eakin, a conservative economist and policy veteran.
As per the WaPo report, behind closed doors, trade envoys from around the world have described a kind of diplomatic group therapy-texting and calling one another to compare notes, hoping to divine meaning from the chaos. In many cases, foreign diplomats don’t even know which US official to talk to.
That tension could limit how effective the “grand encirclement” becomes.
(With inputs from agencies)
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