Will India-US Ties Endure Trump's Rhetoric and Tariffs?

A Fractured Relationship Between India and the United States

Indian Prime Minister Narendra Modi was one of the first world leaders to visit Washington, D.C., shortly after US President Donald Trump began his second term. During this visit, Trump referred to Modi as his "great friend" and both nations set an ambitious goal of doubling their trade to $500 billion by 2030. However, less than six months later, the relationship between the two countries has taken a sharp downturn.

Trump has imposed a 50% tariff on goods imported from India, and he previously threatened an additional 10% tax for India's membership in the Brics grouping, which includes China, Russia, and South Africa. Initially, a 25% tariff was introduced, but Trump recently added another 25% as a penalty for India’s purchase of Russian oil. The Indian government described this move as "unfair, unjustified, and unreasonable." Just last week, Trump labeled India's economy as "dead."

This is a dramatic shift in a relationship that had been steadily improving over the past two decades. It was strengthened by efforts from both governments, bipartisan support, and shared interests on global issues. In recent weeks, there were positive signals from both Washington and Delhi about an imminent trade deal, but it now seems increasingly unlikely.

What Went Wrong?

A series of missteps, geopolitical tensions, and domestic political pressures have strained the negotiations. Delhi has remained restrained in its response to Trump’s criticisms, hoping diplomacy might eventually lead to a trade deal. However, the Trump administration offers no guarantees.

One major issue is Trump repeatedly placing India and its rival Pakistan on equal footing. He hosted Pakistani army chief Asim Munir at the White House just weeks after a conflict between the two nations. Trump then signed a trade deal with Pakistan, offering a preferential tariff rate of 19% and exploring oil reserves. He even suggested that Pakistan might one day sell oil to India.

Another point of contention is Trump's repeated claim that the U.S. brokered a ceasefire between India and Pakistan. India views its dispute with Pakistan over Kashmir as an internal matter and has always rejected third-party mediation. While Trump initially respected this stance, he has since doubled down on his claims, despite Modi’s statement that "no country had mediated in the ceasefire."

Domestic political pressure is mounting on Modi not to "bow down" to the U.S. This has led to growing concerns in India that the U.S. cannot be fully trusted as a partner. Analysts like Michael Kugelman note that while some anger may stem from Cold War-era sentiments, current events have intensified these concerns.

A Complex Geopolitical Landscape

Modi's government thrives on nationalist rhetoric, and its supporters expect a firm response to U.S. actions. However, the situation is a Catch-22: Delhi still wants a trade deal but does not want to appear weak under Trump's pressure.

In response to the U.S. backlash over India’s purchase of Russian oil, Delhi vowed to take "all necessary measures" to protect its national interests and economic security. But why has Trump, who once praised India’s hospitality, turned against a key ally?

Some analysts believe Trump’s harsh rhetoric is part of a negotiation strategy. Jitendra Nath Misra, a former Indian ambassador, suggests that Trump, as a real estate magnate, is a tough negotiator who seeks outcomes similar to those achieved by diplomats.

India made several concessions to the U.S., including no tariffs on industrial goods and a phased reduction of tariffs on cars and alcohol. It also allowed Elon Musk’s Starlink to operate in India. However, the U.S. wanted access to India’s agriculture and dairy sectors to reduce its $45 billion trade deficit.

These sectors are a red line for Modi, as they account for over 45% of employment in India. Successive governments have fiercely protected farmers, making it difficult for Delhi to compromise.

The Role of Russia and Energy Security

Trump’s insistence that India stop importing oil from Russia is likely tied to his frustration with Russian President Vladimir Putin. The U.S. is trying to cut Russia off from its most important oil buyers by penalizing them for doing business with Moscow.

However, India cannot afford to stop buying Russian oil overnight. It is already the third-largest consumer of crude oil, and its energy demand is expected to surpass China by 2030. Russia now accounts for more than 30% of India’s total oil imports, a significant increase from less than 1% in 2021-22.

Many in the West see this as indirectly funding Moscow’s war, but India argues that buying Russian oil at a discount ensures energy security for millions of citizens. Russia remains a key strategic ally for India, and the country sees it as an "all-weather" partner.

A Tenuous Balance

India has maintained a delicate balance with the West, overlooking its strong ties to Russia. The U.S. has long viewed India as a bulwark against Chinese dominance in the Indo-Pacific, ensuring bipartisan support for Delhi in Washington. Moscow, while sometimes reluctant, did not challenge India’s close ties with the West until Trump disrupted this dynamic.

India has been measured in its response so far, but it is not holding back completely. It has pointed out that the U.S. encouraged it to keep buying oil from Russia for global energy market stability. It also noted that targeting India is unjustified as the EU continues to buy energy, fertilizers, mining, and chemical products from Russia.

Despite the current challenges, some analysts believe the relationship is not beyond repair. India and the U.S. have deep ties in space technology, IT, education, and defense. Many large IT firms have invested heavily in the U.S., and major Silicon Valley companies have operations in India.

"I think the fundamentals of the relationship are not weak," says Mr. Misra. "It's a paradox that the day Trump announced 25% tariffs and unspecified penalties, India and the U.S. collaborated in a strategic area when an Indian rocket sent a jointly-developed satellite into space."

Looking Ahead

The future of the India-U.S. relationship depends on how Delhi responds to Trump’s sharp rhetoric. While Trump is unapologetically transactional in his approach, there is still a foundation of trust built over the past two decades.

"So what's lost can potentially be regained," says Mr. Kugelman. "But because of the extent of the current malaise, it could take a long time."