“I think Trump, for the simple reason that by now we have seen a position that they say taco, Trump always chickens out,” Aiyar remarked. “He sort of starts off with an enormous thing and then comes down. It is not that there is a small thing and it builds up. It starts with enormous amounts and then comes down and very often it is put off.”
According to Aiyar, while Trump’s aggressive tone may grab headlines, the actual economic impact of his tariff threats has been modest. “Despite all this talk of enormous tariffs being put by Trump, there was one recent calculation that the effective tariff of the USA is only 11%. There is another calculation that is about 18%,” he pointed out, arguing that the American leader’s “large announcements” frequently turn into delays, partial measures, or empty threats.
Aiyar believes this pattern underscores Trump’s political style: “He starts with large numbers and then comes down. So, Trump is the man who is going to come down.”
However, he added that the broader geopolitical rivalry between the US and China is here to stay, regardless of who sits in the Oval Office. “Let us be very clear, now that there is in effect a kind of cold war, geopolitics is here to stay. This is not something temporary that started with Trump,” he said. Aiyar cited examples such as the freezing of Russian dollar reserves by the Biden administration and the growing concern in India over the security of global reserves.
He warned that the “peace dividend” enjoyed since the fall of the Soviet Union is over, and countries must now prioritize security and self-reliance over cost efficiency. “We have been given a wake-up call by Trump on the tariff side and by China on the availability of certain critical minerals,” Aiyar said, adding that India will need to raise its defence spending beyond the current 2.5% of GDP.When asked whether India could once again become collateral damage in the US-China crossfire, Aiyar was blunt:
“Neither Trump nor China gives a damn about the damage to India, let us be very clear about that. Trump says who are you pro and you say I am only pro USA. China is only pro China.”
He argued that the days of India playing one power against another are over, as global alignments harden. “Playing people off one another has now become very-very difficult. We are no longer in a situation where everybody in some sense was wooing us,” Aiyar said, adding that India must prepare for an era of regional power blocs, with the US dominating the Americas and China asserting itself in Asia.
According to him, India’s growth may slow somewhat as security concerns override globalization, but the economy remains resilient. “Unfortunately, it will mean somewhat slower growth, but India can take that in its stride. If instead of growing at 7%, you are growing at 6%, you will manage,” he noted.
Aiyar also advised that India must play its limited strategic cards carefully. “We cannot buy defence equipment from a country that has put 50% tariffs on me,” he said, hinting that New Delhi could leverage its position as a major defence buyer. Similarly, India could use its pharmaceutical intellectual property policy as a negotiation tool. “American pharmaceutical companies are very-very sensitive to India’s ability to give compulsory licenses,” he explained.
“None of this should be done in a brash manner,” he cautioned. “You do not have to be rude, but you can make it very-very clear.”
Turning to domestic policy, Aiyar urged policymakers not to assume that tweaks to fiscal or monetary policy could offset global headwinds.
“Global growth is going to slow down, and when global growth slows down, it is going to affect us regardless of what we do in our own domestic policies,” he said. “You might end up just by having larger and larger deficits, more and more debt without actually achieving what you want to do.”
He advised a “hunker down” approach, emphasizing patience and prudence amid the global turmoil. “Right now, you may say shells are raining down on you from left, right, and centre. This is a time to hunker down and say okay, we are not going to go all out for growth,” he said.
Even if India’s growth moderates to 6.3%, Aiyar believes the country will still outperform major economies. “6.3 will still be a very good rate and it will still be the highest by far of any major economy,” he said, calling India a “resilient” economy capable of weathering global shocks.
But Aiyar was categorical that the world has entered a protracted geopolitical struggle. “It is not a short-term thing; it is going to continue because we are now in a new cold war scenario,” he said.
And for those expecting quick resolutions, his message was clear: “Mr Trump is not going to stop with the current bunch of what he call deals… He is going to keep hitting other countries in the next three years that he is in power, let us be very clear about that.”
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