President Trump has ushered in upheaval in the global order, in interlinked economic and geopolitical domains. By saying he will impose reciprocal tariffs on all countries – he has also singled out India as a country that imposes high tariffs – Trump has effectively pulled the plug on the World Trade Organization (WTO). Trade arrangements will no longer be multilateral, but bilateral or plurilateral.

Powerful countries like the United States (US) or China would prefer all of them to be bilateral, which allows them to exert the maximum pressure on other countries. A reciprocal tariff would also do away with another cardinal principle of international trade that was enshrined in WTO – that of “special and differential treatment” of developing countries such as India, giving them space to develop their infant industries.

One of the outcomes of Prime Minister Modi’s meeting with President Trump in Washington was an agreement to carve out a bilateral trade agreement by “fall of 2025”. Those are tight timelines, and Trump is unlikely to take “no” for an answer. He has also reiterated after meeting PM Modi what he had said before: that his administration will “soon” impose reciprocal tariffs on countries such as India. What are India’s options, if Washington imposes trade terms Delhi is unable to agree to?

The problem is that in international trade, Delhi is between a rock and a hard place. China, too, cocks a snook at WTO rules when it chooses to, as when it abruptly cut off imports from Lithuania when the latter caused it some minor political offence. India too has been a victim of Chinese trade practices, as China imports very little from India other than raw materials. Chinese companies do not seem driven by conventional profit motives as their aim instead is to capture as much global market share as possible, aided by gargantuan subsidies from their government and other sharp practices.

As Brad Setser, former US treasury department official, has noted: “The rest of the world also wants to produce manufactured goods”. And in a recent New York Times op-ed, he observed “Countries around the world get cheap Chinese products, but they can’t sell nearly as many of their own to China … Mr. Xi has a one-way vision of trade. Mr. Trump often sounds as if he doesn’t believe in any trade. Between the two of them, the global economy is in for a rough ride”.

To cope with this upheaval where both Washington and Beijing are putting up high trade barriers, nations are scrambling to form new trading blocs. Thus, the European Union (EU) has concluded three trade agreements in the last two months – one with Switzerland, another with Mexico, and a third with the South American Mercosur group, the last of these agreements establishing one of the largest trade zones in the world. The EU is talking to Malaysia for another trade agreement, and the Association of Southeast Asian Nations (ASEAN) will be meeting the Gulf Cooperation Council (GCC). The United Kingdom (UK) has joined the Comprehensive and Progressive Agreement for trans-Pacific Partnership (CPTPP), which includes Australia, Brunei, Canada, Chile, Japan, Vietnam, and others. Brazil is talking to Mexico.

Delhi too has started to respond to this developing situation. It resumed negotiations for free trade agreements (FTAs) with the UK and the EU last month, and agreed to conclude an FTA with the EU by the end of this year. The EU is not only India’s largest trading partner in goods, it does not reject the need for a more open economic order or the principle of special and differentiated treatment of developing countries. As European Commission president Ursula Von der Leyen recently said “We play by the rules. Our deals have no hidden strings attached”. Delhi will find it easier to conclude a trade deal with the EU than with the US, and should move quickly in this direction.

Another big low-hanging fruit for India is to become a member of the CPTPP. If Vietnam can thrive within the CPTPP group, India need not be leery of it. It should also look at regions with which it has old trade and historical ties – the UK and the Gulf region. Trade deals need to be finalised with both the UK and the GCC. Trade talks had started with Canada as well but were nixed due to a geopolitical tiff. It is time to restart them especially as the Trudeau administration – to whose actions Delhi had taken strong exception – is on its last legs in Canada now.

Doing trade deals, however, must go hand-in-hand with stepping up India’s own trade and export competitiveness. The proposal in this year’s Budget to set up a high-powered committee for regulatory reform is a promising one. Such a committee, when established, should chart a clear path towards deregulation that takes aim at India’s inspector raj and disentangles the considerable red tape choking the animal spirits of India’s entrepreneurs.

Global capability centres and industrial clusters catering to sectors where India has a comparative advantage should be promoted. R&D investments, both public and private, should be stepped up and government, industry and academia work together synergistically for greater innovation. Human capital development must be a priority, and India promoted as a Global Talent Hub at a time when advanced economies are suffering from labour shortages and demographic decline.

A lot of exciting work – marked by a practical orientation towards implementable ideas – on precisely these areas is being undertaken at The Convergence Foundation (TCF) and portfolio organisations affiliated with it. To cite just a few examples, the Foundation for Economic Development works on economic growth, exports and boosting labour-intensive industries; Prosperiti works on deregulation and ease of doing business; and the Institute for Sustainability, Employment and Growth Foundation works on urban planning and accelerating India’s energy transition.

John F. Kennedy once said “the Chinese use two brush strokes to write the word “crisis”. One brush stroke stands for danger, the other for opportunity”. Perhaps the coming storm is precisely what we need to concentrate our minds on how to make the Indian economy more competitive and productive. The 1991 financial crisis brought in reforms that stepped up India’s economic growth for the long term. More reforms may become inevitable as India is buffeted by adverse trade winds, helping it not just survive the “rough ride” ahead but thrive.