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Tariffs

India's Relationship with the US Under Trump: From Optimism to Disappointment

Strategic Insights

— 2 min read

As the news of Donald Trump's second term spread across India, Foreign Minister S. Jaishankar expressed optimism, stating that India is "not one of the countries" that are nervous about the US. However, this optimism has rapidly unraveled, with trade proposals stalling and a barrage of social media posts from Trump criticizing India's relationship with Russia and threatening tariffs on Indian goods. Analysts attribute the breakdown to the fundamental assumptions underlying the strategic partnership exploding, leaving both countries reeling.

Key Takeaways:

  • The trade negotiations between the US and India have stalled, with Indian and American negotiators unable to agree on a tariff rate below 20 percent, which Vietnam had secured.
  • The US imposed tariffs on Indian goods, including a 25 percent tariff, which could lead to real economic damage to India, particularly in its rapidly expanding iPhone assembly industry.
  • India's fear of genetically modified crops and dairy imports from cows fed with animal-derived products has hindered negotiations, with agriculture remaining a major sticking point.
  • Under Trump, India is seen as a "problem" rather than a priority, in contrast to his predecessor, who viewed India as a key partner in countering China.
  • Tensions between the US and India have been building for some time, including a military confrontation with Pakistan in May, which Trump claimed credit for defusing through trade pressure.
  • Pakistan has gained diplomatic traction in Washington, showing that it understands "how to play the game," according to Michael Kugelman, a senior fellow at the Asia Pacific Foundation of Canada.
  • The US has imposed tariffs on India, while giving a lower rate to Pakistan, with Trump suggesting that Pakistan may eventually sell oil to India.
  • Opposition leaders in India have criticized the foreign policy, stating that it has "completely failed."
  • Some analysts argue that the recent rupture in the India-US relationship is a sign of India's willingness to hold its ground on key issues, such as trade and agriculture.

Statistics:

  • 20 percent: the tariff rate that Vietnam secured in its trade deal with the US.
  • 25 percent: the tariff rate imposed by the US on Indian goods.
  • 10 percent: the baseline duty on Indian goods that will be layered on top of the new 25 percent tariff.
  • 50%: the number of India's workforce employed in agriculture.
  • May: the month when a military confrontation took place between India and Pakistan, with Trump claiming credit for defusing the crisis through trade pressure.
  • June: the month when Modi declined Trump's latest offer of a US visit, citing a scheduling conflict.

Sources:

  • Foreign Minister S. Jaishankar's statement at a forum in November.
  • Three people with knowledge of the trade talks.
  • Nisha Biswal of the Asia Group.
  • Treasury Secretary Scott Bessent's interview with CNBC.
  • Indian Commerce Ministry's statement.
  • Ashley Tellis, a former State Department and National Security Council official.
  • Michael Kugelman, a senior fellow at the Asia Pacific Foundation of Canada.
  • Mukesh Aghi, the head of the US-India Strategic Partnership Forum in Washington.
  • Indrani Bagchi, CEO of the Delhi-based Ananta Centre.
  • Vishnu Gupta, head of the Hindu nationalist group Hindu Sena.
  • Ajay Srivastava, head of the Delhi-based Global Trade Research Initiative.

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