US tariffs and SCO Summit: What does India’s future hold in the face of escalating economic coercion? How will New Delhi tackle the twin imperatives of safeguarding its sovereignty and sustaining growth amid growing trade hostilities? Can the upcoming Shanghai Cooperation Organisation summit serve as a turning point where India, alongside Russia and China, charts a new course to reshape global trade and payment systems that have long been dominated by Western powers? These pressing questions confront Indian policymakers and global observers alike as the world watches a complex geopolitical drama unfold.
The recent imposition of severe tariffs by the United States on Indian exports marks a pivotal moment in the evolving geopolitical landscape, one that transcends mere trade disputes to challenge the very architecture of the global economic order. This decision, ostensibly framed around India’s continued procurement of Russian oil, has sent shockwaves through New Delhi’s economy and its diplomatic calculus, exposing fault lines in the established international system and accelerating a realignment among the world’s major powers.
READ | AI jobs disruption calls for a labour policy overhaul
India’s export sectors will bear the immediate brunt and the long term outcomes of these punitive measures. The once-thriving markets that supplied American consumers are now reeling from sharply curtailed access, undermining livelihoods and investment confidence across multiple states. Export based industries do not operate in isolation; their distress will impact through the broader fabric of India’s economic ambitions and social stability.
SCO summit and India’s response to US tariffs
Yet, beyond these immediate consequences, the tariffs signal a broader strategic contest, one that challenges India’s sovereignty in charting its foreign policy and economic trajectory. Prime Minister Narendra Modi’s resolute assertion that India is prepared to “pay a very heavy price” in defence of its policy autonomy is emblematic of a larger national refusal to acquiesce to economic coercion. It is a stance reflective not only of India’s sovereignty, but also of its insistence on diversifying its diplomatic engagements beyond traditional Western paradigms.
In response to these challenges, India is actively recalibrating its economic strategy to mitigate the fallout from U.S. tariffs. Efforts to diversify export destinations beyond traditional Western markets, with a renewed focus on Africa, Southeast Asia, and Latin America, illustrate New Delhi’s pragmatic push to reduce dependence on any single economy. Simultaneously, the “Atmanirbhar Bharat” (self-reliant India) campaign seeks to foster indigenous innovation and build resilience within critical sectors, aiming to create domestic capabilities that can weather external shocks.
The US strategic calculus and its limits
From the American vantage, the tariffs represent an attempt to leverage economic tools to enforce geopolitical objectives, particularly regarding sanctions on Russia. However, this strategy risks alienating a key partner in India, whose role in the Indo-Pacific and global affairs has been steadily ascending. By imposing punitive measures that disproportionately impact India while sparing China, the U.S. gambit may inadvertently push New Delhi closer to its Eurasian neighbours, weakening the cohesion of Western-aligned coalitions and undermining long-term strategic interests. Such a move raises questions about the efficacy and prudence of economic coercion in achieving geopolitical ends.
Despite growing alignment on economic sovereignty, the SCO and BRICS blocs are not monolithic entities. Deep-rooted political tensions, such as the India-China border disputes and varying Russian and Chinese priorities complicate efforts at unified action. India’s participation in these forums reflects a careful diplomatic balancing act, leveraging the platforms to resist external coercion while managing bilateral complexities. These intricacies could temper the ambition and pace of efforts to forge new global trade architectures, revealing the challenges inherent in reconciling diverse national interests.
The aspiration to create alternative payment systems and digital trading platforms outside the U.S. dollar orbit confronts formidable obstacles. Trust deficits, interoperability issues, and regulatory divergences pose significant barriers to seamless cooperation. The institutional maturity required to operate such systems at scale is substantial, necessitating not only technological innovation but also political will and transparent governance frameworks. The SCO’s ambition, though strategically sound, will thus face a protracted and arduous journey before it can challenge entrenched Western financial hegemony.
Challenging dollar dominance through multipolar trade
A successful SCO-led shift away from dollar dominance risks fragmenting global financial markets. This fragmentation could lead to increased transaction costs, reduced liquidity, and greater volatility, affecting multinational corporations and supply chains worldwide. While enhancing national sovereignty, such a scenario also introduces new systemic risks, forcing market participants to navigate an increasingly complex and unpredictable environment. The interplay between sovereignty and stability thus emerges as a critical tension in the reconfiguration of global trade and finance.
Beyond the principal actors, the SCO’s initiatives resonate profoundly with smaller emerging economies and the Global South, many of which seek emancipation from dollar dependency and Western-dominated institutions. By offering alternative frameworks, the SCO and its allied entities provide a template for these countries to assert greater economic autonomy and influence in global governance. This diffusion of financial agency could democratise global economic power but also demands careful calibration to avoid exacerbating fragmentation.
Potential scenarios post-SCO summit
A breakthrough at this upcoming SCO summit could yield concrete frameworks institutionalising multipolar trade and payment systems, signalling a decisive challenge to the existing order. Alternatively, the summit may produce largely symbolic gestures, constrained by geopolitical distrust and technical hurdles. Western responses—ranging from accommodation to heightened economic rivalry—will significantly shape the post-summit landscape. The summit’s outcomes will thus be a litmus test for the feasibility of reshaping global economic governance in an era of intensifying great power competition.
Larger than life, or should one say larger-than-Trump-imagery expectations centre on whether India, Russia, and China will seize this moment to forge a concerted front that reimagines the rules of global trade and payment systems. The SCO, historically a platform for security cooperation and regional stability, now stands at the precipice of transforming into a fulcrum for economic and financial realignment. The proposal to launch a digital trading platform aimed explicitly at circumventing the dominance of the U.S. dollar is indicative of a desire to erode the hegemony of Western financial institutions and reduce vulnerability to unilateral sanctions.
Escalating economic coercion
However, the dynamics within this emerging coalition are far from seamless. The recent tariff imposition, which notably spared China while targeting India, has paradoxically served to tighten Sino-Russian ties, consolidating a strategic axis that may inadvertently marginalise India. Yet, India’s decision to remain engaged within this framework underscores its pragmatic approach to balancing complex bilateral relationships and global aspirations. It seeks to leverage its position within the SCO to both resist coercion and advocate for a more equitable international system.
READ | Services exports surge to record highs on global demand
The weaponisation of global financial infrastructure, epitomised by mechanisms such as SWIFT, has spurred accelerated efforts to develop alternative networks, including China’s Cross-Border Interbank Payment System (CIPS) and the exploration of central bank digital currencies. These initiatives herald a fragmentation of the once-unified global financial order and portend a future where economic sovereignty is increasingly defended through technological innovation and regional collaboration.
As the SCO summit convenes, it will test the ability of its members to transcend underlying frictions and present a coherent vision that challenges the established economic status quo. The stakes are high: success could herald the dawn of a more multipolar and resilient global trade ecosystem, one less susceptible to coercive diplomacy and economic disruption. Failure, conversely, risks entrenching divisions and perpetuating instability within an already volatile international system.
In this unfolding drama, the repercussions of the U.S. tariffs on India extend beyond immediate economic damage to encapsulate a profound strategic challenge. They compel a reconsideration of global governance structures and the legitimacy of unilateral measures in an interconnected world. India’s response, framed within the broader SCO context, exemplifies a determined pursuit of agency and strategic autonomy, signalling a shift that could reshape not only trade and payment systems but also the contours of global power itself.
Editor’s note: The second part of this article will be published tomorrow.