The year 2025 is likely to be remembered as a decisive rupture in the post-war international order. Within months of returning to the White House, U.S. President Donald Trump dismantled key pillars of multilateral cooperation painstakingly built since 1945. Washington’s withdrawal from the Paris Climate Agreement and the World Health Organization weakened collective action on climate change and global health. Yet the most consequential shift came through the adoption of the America First Trade Policy — a doctrine that redefined trade as an instrument of power rather than cooperation, triggering economic shocks, diplomatic realignments and a rapid fragmentation of the global trading system.
Trade as Power, Not Partnership
The America First Trade Policy framed trade explicitly as a tool of national security and geopolitical leverage. Tariffs, long used as bargaining chips, were elevated into a central strategic weapon. Trump’s assertion that tariffs were “the most beautiful word in the dictionary” captured this worldview. In April 2025, the U.S. announced sweeping “reciprocal tariffs” on 57 countries, with duties reaching punitive levels and implementation deferred briefly to allow negotiations.
The expectation was that targeted economies, heavily dependent on U.S. market access, would quickly concede. Instead, the policy generated widespread uncertainty, raising costs for businesses and disrupting long-established supply chains. More importantly, it marked a structural break: trade policy was no longer anchored in predictability or rules, but in executive discretion.
Retreat from Global Value Chains
For three decades, global value chains — particularly those centred on China — underpinned international production and trade. Even earlier U.S. efforts to reduce dependence on China relied on “friend-shoring” and alliance-based reconfiguration. Trump’s approach went further. It sought to dismantle globalised production itself, erecting protectionist barriers to force reshoring of manufacturing into the U.S.
This inward turn came at a price. Higher production costs, inflationary pressures and fractured supply networks became inevitable. Yet the deeper damage was institutional. By concentrating trade powers in the executive and sidelining Congress and multilateral bodies, the policy weakened the foundations of global economic governance.
The WTO at the Brink
The World Trade Organization, already weakened during Trump’s first term by the paralysis of its dispute settlement mechanism, edged toward irrelevance in 2025. For nearly 80 years, global trade rules evolved through negotiated consensus — first under GATT, then the WTO. Trump’s unilateral tariff regime bypassed these norms entirely.
The signal was stark: market access would be determined by power, not rules. For smaller economies, this represented a dangerous precedent. For the multilateral system, it was an existential crisis.
Why China and India Held Their Ground
Of the 57 countries targeted by U.S. tariffs, Washington secured agreements with only 17. Most notably, China and India refused to yield. China responded with threats of retaliation, while India rejected concessions despite facing tariffs as high as 50% on certain exports.
Trump’s inability to extract compliance from these large economies produced an unintended geopolitical consequence: a thaw in India–China relations. In August 2025, Prime Minister Narendra Modi and President Xi Jinping met on the sidelines in Tianjin — a symbolic but significant step toward easing a five-year standoff.
By year’s end, practical normalisation followed. Flights resumed, visa regimes eased, and China committed to importing more from India. Indian exports to China, which had fallen sharply amid political tensions, surged — rising over 90% in November alone. Trade shocks originating in Washington were thus reshaping Asian diplomacy in unexpected ways.