THE escalating United States-China rivalry driven by trade tensions, tech competition, and shifting alliances is reshaping the global order. The Cold War`s focus on strategic geography has given way to a world led by economic agility and innovation. At this crossroads, India is leveraging its market size and reforms to grow its global clout, while Pakistan faces economic challenges as it seeks relevance in an era defined by trade, technology, and resilience.

Globalisation the invisible driver of three decades of low inflation is unravelling as a populist Trump pursues a neo-isolationist path. Cheap labour, efficient supply chains, and aggressive outsourcing kept prices low and profits high.

Paul Krugman believes that the recent US tariff policies signal a potential end to globalisation. Even if Trump makes a big retreat on tariffs, he has done irreparable damage to globalisation and international confidence in the United States.

Deglobalisation is inherently inflationary, as it replaces global efficiency with more expensive domestic alternatives. Rising input costs, disrupted supply chains, and price volatility now seem structural rather than transitory.

Tariffs stemming from US-China tensions, conflict between the European Union (EU) and the US, unprecedented moves in the US government bond market, and China`s rare earth retaliations indicate more than just a trade war; they point to a deeper economic dislocation that calls for new strategies.

The US-Chinatrade war has sharply intensified, with China halting exports of key rare earths like dysprosium andterbium critical for cars, semiconductors, and aerospace in retaliation for President Trump`s steep tariff hikes. With China supplying 90pc of these minerals, the move threatens global supply chains.

Economist Lawrence Summers warns that tariff-driven chaos risks `economic instability,` arguing Trump`s approach deepens uncertainty without fixing structural trade issues likening it to `digging deeper into a hole` as tit-for-tat escalations continue, with the latest reports of China ordering its airlines not to take any further deliveries of Boeing jets.

India continues to be the fastestgrowing major economy even amidst this upheaval. The US-China rift has driven multinationals to diversify supply chains, and India has lured giants like Apple. In 2023-24, Foxconn and Wistron produced $14 billion in iPhones, with Apple aiming to shift 25 per cent of its global output to India by 2027, up from 5pc in 2020. Foreign direct investment (FDI) equity inflows reached $44.4bn in FY24, a strong figure amidst global FDI declines.

As alliances shift, the US is deepening ties with India, viewing it as a strategic counterweight to China. Bilateral trade hit $129.2bn in 2024, with India exporting $87.4bn and importing $41.8bn. The Quad alliance (US, India, Japan, Australia) counters China`s Indo-Pacific ambitions, whilst military pacts like the Logistics Exchange Memorandum of Agreement (LEMOA) enhance interoperability.

US investments in India`s tech and defence sectors cement this partnership. India`s trade with China reached $118.4bn in FY24, skewed towards imports ($101.7bn) over exports ($16.67bn), reflecting complexinterdependence.

Initiatives like `Make in India` and Digital India have propelled IT exports past $200bn in 2024, with mobile phone exports at $15bn, aided by US tariffs on Chinese goods (29pc in 2025). India`s 570 million internet users drive its digital economy, the world`s third-largest by purchasing power parity.

The International Monetary Fund (IMF) projects 7pc GDP growth through 2030, with India becoming the third-largest economy. Yet, port congestion, ageing infrastructure, and skill shortages could limit growth in the long run, as IMF`s Gita Gopinath has cautioned.

India`s 3pc share of global manufacturing in 2023 trails China`s 32pc, but the `China+1` strategy has boosted Indian imports at firms like Walmart by 30pc since 2020. India`s tariffs, raised to shield local industries, align with deglobalisation`s rise, yet it remains a complement not a rival to China`s industrial dominance.

Strategically, India is negotiating missile sales to Southeast Asia, advancing the Middle East Europe Economic Corridor, and balancing US and China ties Beijing recently signalled openness to more Indian goods whilst championing the Global South.

Pakistan`s story contrasts starkly.

Once a Cold War linchpin near Afghanistan, its strategic value has dimmed as trade and technology take precedence. The China-Pakistan Economic Corridor (CPEC) delivered infrastructure projects, but these came at a steep cost, as more than 80pc of the project`s cost was financed by expensive and unsustainable debt. Trade with Beijing hit $20bn in 2024, dwarfing $7.7bn with the US, entrenching reliance that deters Western investors wary of China`s sway.

Pakistan`s economy faces steep challenges. Textiles, 60pc of exports, struggle with high energy costs and outdated tech, limiting value-added growth. FDI declined to $1.8bn in 2023-24, compared to India`s $44.4bn.

The World Economic Forum ranks Pakistan 107th in competitiveness, underscoring governance and structural woes.

World Bank`s Martin Raiser warned, `Pakistan`s economy is stuck in a low-growth trap, with poor human development and rising poverty.` Yet, Pakistan is striving to respond to the challenges. In April 2025, Army Chief General Asim Munir met a US congressional delegation, reaffirming Pakistan`s commitment to regional security and exploring cooperation. Whilst outcomes remain uncertain amidst global priorities, this outreach signals a pragmatic bid to diversify beyond China, offering cautious hope for recalibration.

Regional integration, especially trade with India, could help Pakistan grow faster. Historical tensions kept commerce negligible, but open borders could revive Pakistan`s textiles, cement, and agriculture, tapping India`s billion-plus market and easing China`s grip. Past talks, like expanding Wagah-Attari trade, stalled amidst distrust.

Pakistan fears India`s manufacturing edge a valid concern but cautious collaboration could lead to growth.

India must accelerate reforms upgrade infrastructure, skillingits workforce, and adopt sustainable policies -to sustain its rise and meet global net-zero goals, as Eswar Prasad of Brookings notes.

Strengthening ties with the EU and the Association of Southeast Asian Nations (Asean) can reduce dependence on US-China dynamics, while leveraging US support through initiatives like the IndoPacific Economic Framework enhances its global role. As Council on Foreign Relation`s Manjari Chatterjee Miller observes, India`s strategic balance between Washington and Beijing cements its place in a multipolar world.

Pakistan faces a tougher climb. Modernising governance, reducing inter-provincial tensions, fixing energy issues, and diversifying exports, are critical.

Its US outreach, though nascent, shows intent. Reviving the South Asian Association for Regional Cooperation (Saarc) or exploring the Indian trade could anchor it regionally if historical grievances ease.

Deglobalisation`s pressures rising costs and supply chain strains -add urgency to these reforms, especially as US-China tensions, like the rare earth standoff, ripple globally.

The US-China rivalry, amplified by deglobalisation, tests South Asia. India is poised for a larger global role, driven by reforms, digital prowess, and diversified partnerships.

Pakistan, striving to adapt, risks marginalisation without bold action. In this new world disorder, economics trumps geography. • The writer is former head of Citigroup`s emerging markets investments and author of `The Gathering Storm`