Call it the axis of major economies that are moving on without the US.
US officials wondering what effect President Donald Trump’s move to slap 50% tariffs on India might have need look no further than Prime Minister Modi’s travel schedule. This week, the Indian leader was in Beijing, standing shoulder to shoulder with China’s Xi Jinping and Russia’s Vladimir Putin.
Modi’s first trip to the Chinese capital in seven years is giving the push for a less US-centric multipolar world greater urgency. The optics of the overt displays of camaraderie sent a message of defiance to a Trump White House trying to pound China and India into economic submission.
Yet neither Xi nor Modi is assuming the position that Trump expected. Instead, Trump’s trade war is breathing new life into a BRICS economic bloc that, prior to January, seemed on the ropes.
Back then, the Brazil, Russia, India, China, South Africa grouping had lost momentum in creating a cohesive alternative to the US-led order. So much so that Xi didn’t bother to attend this year’s big BRICS summit in Rio de Janeiro in July. It raised many eyebrows, considering the “C” is the only reason anyone cares about the BRICS.
Then came Trump’s 50% India tariff a month later. The rate shocked officials in New Delhi as much as anywhere. It matched Trump’s tariff on Brazil.
Trump had long been down on the developing world’s answer to the Group of Seven. But the real red line for the US leader, it’s now clear, is the BRICS joining forces to replace the dollar as the reserve currency.
Ostensibly, Trump’s 50% levy was in response to Brazil holding former President Jair Bolsonaro accountable for a 2022 attempt. However, in addition to Brazil and India, Trump has imposed significant tariffs comparatively on China (30%) and South Africa (30%). The latter confronts the highest rate in all of sub-Saharan Africa. Nigeria, Ghana, Lesotho and Zimbabwe face just 15%.
Trump has largely gone easy on Putin. But miffed that India is helping Russia get around US oil sanctions, Trump is going after Russia via Modi’s economy. And it may already be backfiring in tantalizing ways.
“The classic maxim of foreign policy is unite your friends and divide your adversaries,” former Treasury Secretary Larry Summers told Bloomberg. “This should be an occasion for some real soul-searching on the part of America’s national security thinkers.”
Modi’s sudden visit to China follows an agreement announced by the two nations last month to resume direct flights, ease Chinese export controls, and reduce border tensions.
To be sure, India isn’t exactly going all-in on Xi’s China. Jeremy Chan, analyst at Eurasia Group, noted that Modi arrived in Tianjin from a bilateral summit in Tokyo and deliberately left before the Victory Day parade. That, Chan said, had the effect of “signaling that despite the improvement in relations with China, India still prioritizes its relations with Japan and the West.”
But as University at Albany’s Christopher Clary tells The Guardian: “India likes other great powers to know that New Delhi has options. One advantage of being in lots of clubs is you can make high-profile entrances to those clubs if you’re upset with how things are going in other relationships.”
As such, Clary added, the Xi-Modi-Putin confab “was a partial response to Trump’s tariff tantrum. The core reality for India is that it doesn’t have enough military capability to be confident of how an India-China fight would go. In this Trumpian world, India may not be able to find an outside ally that it can depend on, and so it needs to make sure the India-China relationship is calm.”
China, Chan explained, used the recent Shanghai Cooperation Organization summit to amplify its support for the Global South and its vision of a multipolar world. It was a chance for Beijing to contrast China’s approach to global security — non-interference, multilateralism, and dialogue — with the US-led order.
In general, Chan noted, Beijing has been unwavering in its criticism of “unilateral bullying” and US “hegemonism.” That has Xi’s Communist Party broadening its strategy of leveraging international resentment toward the US under Trump to “deepen ties with developing countries.”
Part of Modi’s motivation is that “India, for its part, has received a raw deal that could significantly hit its exports to the US,” noted economist Priyanka Kishore at Asia Decoded. While further trade talks may bring down the 25% tariff rate and provide reprieve from a ‘Russian penalty rate’, Kishore said, “it appears unlikely that India will secure a significantly better outcome than its eastern neighbors, raising questions about its relative appeal as a China+1 destination.”
Shilan Shah, an economist at Capital Economics, warns that “India’s attractiveness as an emerging manufacturing hub will be hugely undermined” by Trumponomics. US spending, Shah said, provides around 2% of India’s GDP and Trump’s extra 25% tariff is “large enough to have a material impact.”
Economist Ajay Srivastava at New Delhi think tank the Global Trade Research Initiative, noted that US actions could “push India to reconsider its strategic alignment, deepening ties with Russia, China, and many other countries.”
It’s clear that India’s “worst fears” have materialized as Trump 2.0 does its worst, said India’s former central bank governor Urjit Patel. “One hopes that this is short-term, and that talks around a trade deal slated to make progress this month will go ahead,” Patel noted. “Otherwise, a needless trade war, whose contours are difficult to gauge at this early juncture, will likely ensue.”
As of now, India’s GDP outperformed expectations in the second quarter. In fact, the economy gained steam in the April-June quarter. Asia’s third-largest economy expanded 7.8%, the fastest pace in five quarters.
“Despite the reciprocal penal tariff, we are maintaining our growth range of 6.3%-6.8% for the full year,” India’s Chief Economic Adviser Anantha Nageswaran said at a press conference after the data release.
India is being “driven by favorable cyclical factors such as low inflation and rate cuts by the Reserve Bank of India,” said economist Carlos Casanova at Union Bancaire Privée. Private final consumption expenditure remained steady at 7.0%, while government spending rebounded significantly to 7.4%, up from a contraction of 1.8% in the first quarter.
“Looking ahead, though, economic activity is expected to face headwinds due to heightened geopolitical tensions with the US,” Casanova noted. “While India’s exports to the US account for less than 2% of its GDP, making the direct impact from tariffs manageable, the uncertainty is weighing on investor sentiment, dampening fixed capital formation and foreign direct investment.”
Casanova added that “as a consumption-driven economy, India is well-positioned to mitigate these challenges through recent policy measures.” For instance, he noted, the government plans to simplify the four-tier goods and services tax (GST) structure to two rates by early October, reducing most goods taxed at 12% to 5% and those at 28% to 18%.
“This move aims to boost domestic demand while offsetting the impact of US tariffs on exports,” Casanova said. “Additionally, the reform is expected to ease inflationary pressures, creating room for the RBI to consider further rate cuts during its October policy review.”
UBS Securities economist Tanvee Gupta Jain said that “the timing of GST reforms is apt,” given the need for counter-cyclical policy measures to offset tariffs. Tax cuts and reforms, she noted, will support household spending over the next few quarters.
DBS Group economist Radhika Rao said that “lower GST rates will be positive for growth in the second half of the year,” expanding the size of India’s formal economy.
India’s Finance Minister Nirmala Sitharaman noted that “we have reduced the slabs, there shall be only two slabs, and we are also addressing the issue of compensation cess, ease of living, simplifying registration, return filing, and refunds. These reforms have been carried out with the focus on the common man. The rates have come down drastically.”
Modi’s government has pledged support for sectors affected by US tariffs and has stated that it will propose tax cuts to stimulate domestic demand. It had earlier cut income taxes starting in April.
“Private consumption is supported by tax relief, rate cuts, crops sowing, though households may defer discretionary purchases until proposed consumption tax cuts take effect in the festive season,” said economist Aditi Nayar at ICRA ratings agency.
At the moment, India’s current account deficit indicates it’s importing more than it’s exporting. “Front-loaded exports to the US and continuously healthy service exports helped lower the fiscal first quarter deficit,” said economist Madhavi Arora at Emkay Global Financial Services.
“However, payback from last quarter and tariff-led hit to labor-intensive sectors could imply the fiscal-year 2026 deficit could cross 1.2% of GDP with further upside risks,” Arora added.
The core five BRICS members, remember, have yet to create anything even approaching a free-trade zone. Along with tensions over decades-old border disputes, China and India are competing fiercely for economic influence among “Global South” nations. Russia’s invasion of Ukraine is a controversy the BRICS could do without. Brazil and South Africa worry about BRICS expansion, which might dilute their power.
Trump’s provocations, though, are proving to be a game-changer, driving India into China’s orbit. And giving renewed urgency to devising an alternative to the US economy – one BRIC at a time.
Follow William Pesek on X at @WilliamPesek
