Former Indian Ambassador to the US Meera Shankar has urged India to fundamentally rethink its trade and diplomatic strategy following President Donald Trump's address at the World Economic Forum in Davos. Speaking to CNBC-TV18, Shankar emphasized that globalisation is no longer the guiding principle of US economic policy, requiring India to adapt to a new reality where domestic American priorities dominate international economic decision-making.

Trump's Economic Vision and Policy Shift

Trump used his Davos speech to claim an "economic miracle" at home, asserting that his policies had defeated inflation, boosted growth, and revived American manufacturing within a year of his return to office. He defended a sharp shift in energy policy, prioritizing domestic energy production, opening new plants, and rejecting wind power approvals, while backing tax cuts and higher tariffs as central to his economic agenda.

The President contrasted the current situation with what he described as "stagflation" under the previous administration, calling the economic turnaround "phenomenal news." His remarks clearly linked trade and security considerations, particularly regarding Greenland and Europe.

European Response Marks Historic Shift

Shankar observed that Europe's response represented a clear break from past diplomatic approaches. "This is not just a transition or something temporary, but a rupture or disruption of the old order," she said, pointing to unusually strong pushback from European leaders including President Macron, leaders of Belgium and Denmark, and European Commission President Ursula von der Leyen.

Trump's message to Europe was explicitly transactional: "they can say yes and America will appreciate it, or they can say no and America will remember." He warned that "remembering" could include pushing tariffs from the current 10% to 25% by June if no progress occurs on US acquisition of Greenland.

Strategic Analysis of US-Europe Dynamics

Harsh Pant, Vice President at the Observer Research Foundation, noted that Trump had been clear and deliberate in laying out his position. "Mr Trump has marked his territory very carefully and very clearly," Pant said, adding that the strategic logic behind Greenland made sense from a US national security perspective.

According to Pant, Europe's ability to respond effectively remains constrained by internal divisions and limited leverage. While tools such as reciprocal tariffs, restricted market access, or delays in trade agreements exist, he noted that "it is not entirely evident that Europe has the levers to pull," especially on national security and NATO-related issues.

Implications for India's Trade Strategy

For India, Shankar emphasized that the message from Davos was clear but challenging. Trump's speech reinforced that domestic political priorities in the US would dominate economic decision-making, with policies increasingly driven by the interests of American workers under the "Make America Great Again" agenda.

"Globalisation is no longer the theme of the day," Shankar explained, noting that the US Commerce Secretary had stated policies are being driven by the interests of American workers. She advised that India would need to look for opportunities within this framework, even as trade talks with Washington remain uncertain.

Alternative Strategic Options

Shankar highlighted the potential significance of progress on an India-EU trade deal as a strategic alternative. If concluded, such an agreement could provide India with greater strategic flexibility and signal that India has alternative markets and partners, easing pressure in negotiations with the US.

Ursula von der Leyen indicated there is still ground to cover on the India-EU deal, but suggested it could potentially be signed by January 26, describing it as potentially the "mother of all trade deals." This development would occur at a time when global trade is becoming increasingly fragmented and transactional, offering India crucial strategic alternatives in an evolving international economic landscape.

Indian equity markets are positioned to react on Thursday following US President Donald Trump's positive remarks regarding a potential India-US trade deal. The comments were made during the World Economic Forum summit in Davos, where Trump was directly questioned about the status of trade negotiations between the two nations.

Trump's Davos Comments

When asked by Moneycontrol's Chandra Srikanth about the India-US trade deal, Trump responded with optimism about future bilateral relations. His statement reflected confidence in the negotiation process and emphasized his personal relationship with India's leadership.

Current Trade Dynamics

The trade relationship between India and the US currently operates under challenging conditions for Indian exporters. Indian exports face significant tariff barriers in the US market, creating substantial cost implications for businesses.

Market Context

Indian stock markets have experienced considerable volatility in recent trading sessions. The Sensex and Nifty indices have faced selling pressure due to multiple contributing factors, making Trump's positive trade comments potentially significant for market sentiment.

The lack of a specific timeline for the trade deal completion suggests that while the tone remains positive, investors will need to monitor further developments for concrete progress. The ongoing negotiations represent a critical aspect of India-US economic relations, with potential implications for various sectors dependent on bilateral trade.