upsc current affairs for 21 January 2026

Trump Trade Wars Latest News

• US President Donald Trump’s second term has triggered sweeping geopolitical and economic disruptions, with his aggressive trade and foreign policies paradoxically strengthening China’s global economic position.
• In his first year back in office, President Trump signed hundreds of executive orders, launched a renewed trade war, withdrew the US from key international institutions, ordered mass deportations, and undertook military actions in Yemen, Iran, and Nigeria, reshaping global stability.

Trump’s Upheaval and its Unintended Impact

• From Ally to Threat: Europe’s Shock - Where Russia once dominated Europe’s threat perception, the US has now emerged as a major source of uncertainty, unsettling transatlantic relations and altering Europe’s strategic calculations.
• Markets Signal Global Anxiety - Rising geopolitical and economic instability under Trump has driven investors toward safe-haven assets, pushing gold and silver prices to record highs amid fears linked to US policy unpredictability.
• The China Paradox - Despite Trump’s intent to isolate China through trade curbs and technology restrictions, China has emerged economically stronger, benefiting from a record trade surplus that surged to historic highs by December 2025.
  • China achieved 5% economic growth in 2025, meeting official targets. A booming trade surplus offset domestic challenges such as weak consumption and a prolonged property crisis, even amid tariff pressures.
  • Rather than retreating, China responded to US pressure by deepening integration with global markets, reinforcing its position in international trade and reshaping global trade relationships.

Canada–China Reset After Years of Strain

• Canadian Prime Minister Mark Carney’s visit to Beijing marked a pivotal reset in bilateral ties after nearly a decade of diplomatic chill. 
• Canada and China agreed on tariff reductions for Canadian canola and seafood, and limited access for Chinese EVs to the Canadian market.
• During the visit, Carney and Chinese President Xi Jinping signalled the start of a “new strategic partnership”, reflecting a pragmatic turn driven by shifting global trade dynamics and shared economic interests.

Beijing Draws Global Leaders

• Carney’s trip fits into a broader pattern of world leaders re-engaging with China. 
• South Korean President Lee Jae Myung visited Beijing earlier this month, the first such visit since 2019. 
• UK Prime Minister Keir Starmer and German Chancellor Friedrich Merz are also expected to visit soon.
• As the US retreats from its traditional role as the anchor of global trade under President Trump, countries are increasingly bypassing Washington to deepen partnerships with China and among themselves, reshaping the global economic order.

Global Supply Chains Are Stretching, Not Shrinking

• Recent analysis by the analysts shows that global trade is reconfiguring rather than retreating. 
• Average trade distances are at record highs, with expanding flows across Asia, West Asia and Africa more than offsetting reduced US trade.
• As per their analysis, trade surged in early 2025 as firms front-loaded shipments ahead of expected tariff changes.

China’s Rising Influence in Global Perceptions

• A January 2026 paper by Timothy Garton Ash and colleagues highlights a growing global expectation that China’s influence will expand over the next decade. 
• More countries now view Beijing as an ally or necessary partner, even as confidence in US leadership declines.
• Another study points out that the expectations of US leadership under Donald Trump have fallen sharply over the past year, including in countries like India and South Africa. 
• Many now believe Trump’s actions have inadvertently strengthened China’s global standing.
• Many Europeans no longer see the US as a reliable ally and are keen to rearm. Russians now view the EU as a greater adversary than the US, while Ukrainians increasingly look to Brussels rather than Washington for support.

India’s Cautious Rebalancing Toward China

• New Delhi has begun a calibrated opening in its engagement with China, reflecting a pragmatic reassessment of foreign policy options amid a sharply deteriorating economic relationship with the United States under the Trump administration.
• Even as border disputes and strategic differences persist, India and China have addressed some “low-hanging fruit” in bilateral ties. 
• However, New Delhi now expects reciprocity from Beijing, particularly in easing curbs on Indian businesses and sensitive sectors such as rare earth magnets, before further liberalisation on its part.
• India’s trade data signals this pivot. In December, exports to China surged nearly 70% to $2 billion, while shipments to the United States fell by almost 2% to $6.8 billion, as steep US tariffs reshaped export priorities.
• The US has imposed tariffs of up to 50% on Indian goods — among the highest levied on any country, even exceeding those on China. 
• These measures have disrupted trade flows and strained diplomatic ties, pushing India to diversify markets and recalibrate external economic partnerships.

Source: IE