Chris Bambery describes some shifting global axes after the Shanghai summit

Trump’s great ambition is to win the Nobel Peace Prize. He won’t get that for Gaza or Ukraine, but he has managed to bring together two powers who were permanently on the edge of war – China and India. Unfortunately for him neither are likely to nominate him.

The rapprochement between Beijing and New Delhi came after Trump recently imposed 50% tariffs on India for buying Russian oil and weapons. Trump also demanded that the EU impose 100 percent sanctions on India.

Indian Prime Minister Modi was so angry that he reportedly declined to speak with the President apparently declining four of Trump’s phone calls.  Modi would have been aware of Trump’s declaration  on Truth Social: ‘I don’t care what India does with Russia, they can take their dead economies down together, for all I care.’

An Indian minister, S Jaishankar, called Trump’s demand that India stop buying Russian oil ‘unjustified and unreasonable’ and accused the West of hypocrisy since Europe trades far more with Russia than India does.

Indian Imports from United States totalled US$40bn during 2024. Indian exports to the United States, its largest export destination, were valued at $132bn in  2024-2025. Not bad for India’s ‘dead economy’!

More bad news for Trump came when the EU refused to apply 100% sanctions:

‘… the EU is … concluding a trade deal with New Delhi. The two sides are deliberating this week, looking to resolve their differences over issues of agriculture, dairy, and non-tariff barriers to meet an ambitious end-of-year deadline for a deal.

Prime Minister Narendra Modi on Wednesday had a telephonic conversation with his Italian counterpart Giorgia Meloni, deliberating bilateral ties, trade, and global issues, including the Ukraine conflict.

Efforts have intensified to finalise the free trade agreement between India and the European Union by December.’

Trump is discovering that with 14.8% of the global economy, the US is not in such a strong position, particularly with countries like India and Brazil who have a historically troubled record of involvement with the US. In Brazil’s case that’s obvious. Washington has been behind various military coups which installed assorted vicious dictatorships.

During the Second World War, knowing that Indian independence was coming, Washington manoeuvred the new state into its orbit. But India’s first prime minister, Jawaharlal Nehru, refused to align with America. Instead he helped forge the Non-Aligned Movement with Egypt’s Nasser and Yugoslavia’s Tito. Later he would conclude economic agreements with the Soviet Union. All of this got up Washington’s nose.

Faced with Trump’s punitive tariffs, India has shown no sign of backing down, instead signing more agreements with Russia to deepen economic cooperation. Indeed, its government has described Russia as an ‘all-weather friend.’While there are some more expensive alternatives, Russian oil’s cost-effectiveness and reliability make it a critical driver of India’s economy.

As Trump tells India to choose between USA and Russia, Modi has concluded that he needs Russia more. Being shut out of the US market means India is having to look elsewhere for trading partners and China, in that sense, is a natural fit.

There has been bad blood between India and China over the disputed border in the Himalayas following Indian independence. This led to a war in 1962 and almost a repeat in 2020.

So Modi’s attendance at the Shanghai Cooperation Summit (SCO) was a bit of a bombshell.

Shanghai Cooperation Summit

The SCO is a political, economic and international security organisation of ten member states, established in 2001 and branded as an ‘anti-Nato alliance’ by the European Council on Foreign Relations.[1]

The recent SCO summit has further reaffirmed this reset in relations. India’s Ministry of External Affairs noted that the ‘two countries are development partners and not rivals.’ China’s Ministry of Foreign Affairs agreed, noting that it is the ‘right choice for China and India to be good-neighbourly friends.’

Modi also had meetings with Chinese President Xi Jinping and Russian President, Vladimir Putin. As a result of the first meeting India and China agreed to establish an expert group, the Working Mechanism for Consultation and Coordination on the India-China Border Affairs framework, to ‘explore early harvest of boundary delimitation.’ It is charged with working out a phased approach towards resolving the border issue.

A full alignment between India and China will not be easy. Aside from the border, China is still closely allied with Pakistan. In the brief war between India and Pakistan in May this year Pakistani Chinese supplied Chengdu J-10 warplanes and PL-IFE missiles shot down three Indian French supplied Dassault Rafale warplanes, the first time one has ever been lost in combat.

India is also a member of the Quad – a military grouping of Australia, India, Japan, and the United States aimed at China.

This underlines that India is an imperialist power, albeit one with regional rather than global ambition. But the point is that if India, which is closely tied to Israel, will not follow Washington’s diktats it shows that the US is not quite the global hegemon it is often painted as. Even the EU, the toady of toadies, has just managed to gather sufficient bottle to say no to Trump.

De-dollarisation

The dollar is the world’s reserve currency, meaning it’s used for international business, in the oil trade for instance. There are signs that global US financial power is weakening.

J.P.Morgan noted in July
‘… de-dollarization is unfolding in central bank FX reserves, where the share of US$ has slid to a two-decade low.

In fixed income, the share of foreign ownership in the U.S. Treasury market has fallen over the last 15 years, pointing to reduced reliance on the dollar.

De-dollarization is most visible in commodity markets, where a large and growing proportion of energy is being priced in non-dollar-denominated contracts.’

On 1 September the Financial Times reported:

‘Developing countries are moving out of dollar debts and turning to currencies with rock bottom interest rates such as the Chinese renminbi and Swiss franc.’

This shift, embarked on by indebted countries including Kenya, Sri Lanka and Panama, reflects the higher rates set by the US Federal Reserve, which have angered President Donald Trump as well as increasing other countries’ debt-servicing costs.

‘The high level of interest rates and a steep US Treasury yield curve … has made US$ financing more onerous for [developing] countries, even with relatively low spreads on emerging market debt,’ said Armando Armenta, vice-president for global economic research at Alliance Bernstein. ‘As a result, they are seeking more cost-effective options…’

With the benchmark US federal funds rate at a range of 4.25% to 4.5%, far higher than equivalent rates set by other major central banks, the outright cost of new borrowing in dollars is relatively high for many developing nations, even if spreads for such debt are at their lowest premiums over US Treasuries in decades. The Swiss National Bank cut rates to zero in June while China’s benchmark seven-day reverse repo rate is 1.4 per cent. Because of Western sanctions, India, China and Türkiye now pay for Russian oil products Chinese Renminbi. Some Indian companies have started paying for Russian coal imports in Renminbi and Bangladesh also recently used them to pay Russia for its 1.4 GW nuclear power plant.

Today China pays Brazil in Renminbi and Brazil pays China with Reals. China, Russia and Türkiye have been increasingly switching from dollar reserves to buying up gold over the last two decades.

However, de-dollarisation is still a long way off. Imperialist powers are a band of warring brothers. That infighting has been enflamed by Trump’s tariffs. We have no side in such fights but it can help weaken imperialism’s grip on the world and, in that sense, is to be welcomed.

Trump’s tariffs and the US trade deficit

Let’s return to Trump’s tariffs. Who are they going to hurt?

The total value of US$ imports from the top ten countries exporting to the US (Mexico, China, Germany, Japan, Vietnam, South Korea, Taiwan, India, Italy) in 2024 is approximately US$ 2,148 billion. The top ten countries receiving US exports in 2024, in dollar values were Canada, China, Mexico, the Netherlands, United Kingdom, Japan, Germany, South Korea, Brazil and Singapore.

Total US exports stood at $2064 billion in 2024, total imports from just the top ten countries stood at $2–2.3  trillion. That is a massive trade deficit.

Exporters to the US such as Japan, South Korea and Taiwan are key components of the alliance the US has built to counter China in the South China Sea and the Pacific. Trump is in danger of alienating them.

Mexico and China feature so largely because so many American corporations have production based there but that’s also true of China, Vietnam, South Korea and Taiwan who are among the top exporters to the US.

Those corporations did not base production there because there were no or low tariffs on re-entry of goods to the US, but because of lower wage costs, poorer working conditions and higher productivity. It would take a lot, and a lot of expense, to get them to re-establish those States side.

Trump’s tariffs have also divided the US elite – witness the spat between Elon Musk and Trump. This is potentially good news for US working people.

It all seems a long way from the collapse of the Soviet Union and the declaration of a supposed unipolar world order.

[1] Members are China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Uzbekistan, India, Pakistan, Iran Belarus.