DAW 13th February 2026, Mains Answer Writting 2027
Question
Examine the impact of rising protectionism and tariff barriers on global supply chains and developing economies. (15 marks 250 words).
Model Answer
Approach:
Introduction (2–3 lines)
Briefly highlight the resurgence of protectionism in the global economy, the context surrounding it and its relevance for global supply chains and developing economies.
Body
Examine the impact of rising tariffs and trade barriers on global supply chains (GVC disruption, reconfiguration, resilience focus) and on developing economies (export competitiveness, industrialisation pathways, investment, and employment), supported by relevant examples.
Suggest reforms at the global level, strategies for developing economies, and India-specific measures to balance resilience with openness.
Conclusion
Reiterate the need for diversified trade strategies and a strengthened rules-based global trading system.
Introduction
In recent years, the global economy has witnessed a resurgence of protectionism, manifested through higher tariffs, non-tariff barriers, industrial subsidies, and strategic trade restrictions. Driven by economic nationalism, geopolitical rivalries, climate policies, and supply-chain vulnerabilities exposed during COVID-19, this shift has significantly altered global supply chains and posed serious challenges for developing economies.
Body
Why Protectionism Is Rising in the Contemporary Global Economy
Economic Nationalism and Deindustrialisation:
Advanced economies facing manufacturing job losses have adopted protectionist measures to reshore industries and safeguard domestic employment.
U.S. Inflation Reduction Act and the EU Critical Raw Materials Act that are part of a broader global trend of reshoring and securing supply chains. These are aimed at reducing import dependence and supporting local industries.
Geopolitical Rivalries and Strategic Decoupling:
Intensifying geopolitical competition, particularly between the US and China, has led to trade restrictions, export controls, and technological decoupling.
In May 2025, the U.S. government tightened U.S. export controls on chip-design and semiconductor technologies aimed at limiting China’s access to cutting-edge tech.
Supply Chain Vulnerabilities Exposed by COVID-19:
The pandemic revealed excessive dependence on global supply chains for critical goods, prompting countries to localise production and pursue supply-chain resilience through diversification strategies.
COVID-19 highlighted that shortages of PPE, ventilators, test kits, and other medical equipment severely affected many countries — including India — because most components and raw materials were imported
Rising Inequality and Populist Politics:
Growing income inequality and political populism have strengthened demands to protect domestic industries from foreign competition.
Impact on Global Supply Chains
Disruption of Global Value Chains (GVCs):
Protectionist tariffs increase the cost of intermediate goods, disrupting cross-border production networks in sectors such as electronics, automobiles, and pharmaceuticals.
The US–China trade war (since 2018) led to higher costs and supply delays in electronics, automobiles, and machinery, affecting firms across Asia and Europe.
Shift from Efficiency to Resilience
Earlier supply chains prioritised cost efficiency; protectionism has forced a shift towards resilience, redundancy, and strategic autonomy.
This raises production costs and weakens economies of scale, affecting global competitiveness.
Supply Chain Reconfiguration:
Firms increasingly adopt diversification strategies such as “China + 1”, near-shoring, and regionalisation to reduce dependence on single markets, leading to fragmented and less efficient supply chains.
Apple’s diversification of manufacturing to Vietnam reflects efforts to reduce exposure to US–China trade tensions.
Increased Vertical Integration:
Companies seek greater control over critical inputs and technologies, reducing reliance on international suppliers but weakening the international division of labour.
The US CHIPS Act (2022) and the EU Critical Raw Materials Act (2023) illustrate this trend, reshaping global industrial geography.
Digital Transformation of Supply Chains:
To manage trade uncertainty, firms increasingly use digital tools such as data analytics, artificial intelligence, and blockchain to enhance visibility, compliance, and predictive capacity.
Impact on Developing Economies
Reduced Export Competitiveness:
Higher tariffs in advanced economies limit market access for developing-country exports, particularly labour-intensive manufactures like textiles and electronics.
According to the Global Trade Research Initiative (GTRI), recent tariff actions by US affected over USD 60 billion of Indian exports, including textiles, gems and jewellery, seafood, and engineering goods.
Disrupted Industrialisation Pathways:
Protectionism weakens the traditional development pathway based on integration into Global Value Chains (GVCs), which historically enabled technology transfer, skill upgrading, and scale economies.
Many Least Developed Countries (LDCs), such as Bangladesh and Cambodia, remain vulnerable as restrictions on garments and footwear exports limit their primary growth drivers.
Uneven Outcomes Across Developing Countries:
Some economies benefit from supply-chain relocation and trade diversion, while others face adverse spillovers.
Countries such as Vietnam and Mexico have gained from China+1 strategies as multinational firms relocate manufacturing away from China.
Conversely, several emerging economies, including India, Indonesia, and Thailand, face surges of low-priced Chinese exports diverted from US and EU markets often described as “China Shock 2.0” placing stress on domestic industries.
Employment and Growth Pressures:
Trade-linked sectors face job losses, lower investment, and macroeconomic stress, especially where exports form a major growth driver.
Constraints on Innovation:
Trade barriers and technology restrictions can suppress innovation and distort resource allocation in developing economies.
Investment and Currency Stability Concerns:
Prolonged trade exclusion can trigger outward capital flight, placing sustained pressure on exchange rates and complicating macroeconomic management.
As highlighted in earlier India–US trade discussions, failure to secure market access can trigger outward capital flight and weaken currency stability.
Way Forward
Strengthening Global Trade Governance
There is a pressing need to reform multilateral trade rules to address emerging issues such as digital trade, climate-related tariffs, industrial subsidies, and supply-chain security, which are currently inadequately regulated.
The dispute-resolution mechanism must be restored and strengthened to reduce unilateral tariff actions and prevent escalation of trade wars.
Greater international coordination is required to ensure that climate and security-related trade measures do not become disguised forms of protectionism.
Strategies for Developing and Emerging Economies
Diversification and Risk Mitigation
Developing economies should diversify export markets and supply chains to reduce dependence on a limited set of countries or regions.
Strengthening regional trade arrangements can provide alternative markets and buffers against external shocks.
Moving Up the Value Chain
There is a need to shift from low-value, tariff-sensitive exports to higher-value manufacturing and knowledge-intensive activities through industrial upgrading and innovation.
Investment in skills and technology can reduce vulnerability to automation and protectionist barriers.
Leveraging Services and Digital Trade
Emerging economies should increasingly capitalize on services and digital trade, which face fewer tariff barriers and offer higher value addition.
Digital public infrastructure and cross-border service delivery can become new growth engines.
India-Specific Policy Priorities
Securing Market Access
India must proactively secure market access through strategic Free Trade Agreements (FTAs) with major partners such as the US and EU, while protecting sensitive sectors.
The India–USA Trade Deal (2026) illustrates how emerging economies must secure market access through negotiation amid rising protectionism.
By reducing US tariffs on Indian goods from nearly 50% to 18% and removing punitive duties, the deal restored export competitiveness, stabilised investment flows, and positioned India as a China+1 supply-chain alternative.
Balancing Self-Reliance with Openness
Initiatives such as Atmanirbhar Bharat should focus on building competitive domestic capacity without leading to inward-looking isolation.
Selective liberalisation (in sectors which enhances export competitiveness) combined with domestic incentives can help India integrate into global value chains.
Enhancing Competitiveness
Sustained investment in infrastructure such as creation of Special Economic Zones, logistics, and connectivity, including initiatives like PM Gati Shakti, is essential to reduce trade costs.
Continuous focus on human capital development and skilling will enable Indian industries to adapt to technological change and remain globally competitive.
Conclusion:
Rising protectionism has weakened the efficiency, resilience, and predictability of global supply chains while constraining the growth and industrialisation prospects of developing economies. Adapting to this environment demands diversified trade strategies, calibrated global engagement, and a renewed commitment to a stable, rules-based trading order.