In May, when Indian Prime Minister Narendra Modi met with President Donald Trump in the Oval Office, the atmosphere was filled with optimism. Modi was buoyed by the prospect of a second term for Trump, believing their personal bond could foster a stronger U.S.-India relationship. The two leaders had previously shared significant moments, such as the “Howdy Modi” rally in Texas in 2019 and a mega-event in Gujarat in 2020. Modi's hope was that they could continue to advance bilateral relations with “the same warmth, the same trust, the same excitement.” However, the reality took a sharp turn just weeks later.
On July 30, negotiations for a U.S.-India trade deal hit a deadlock when Trump unexpectedly announced a punitive 25 percent tariff on Indian imports via his platform, Truth Social. To add insult to injury, he declared a trade agreement with Pakistan, India’s long-standing rival, offering a lower tariff rate of 19 percent. This decision marked the beginning of escalating tension between the two nations.
Trump's comments on India's economy being “dead” and his warning of “substantially” increased tariffs became increasingly alarming. By midweek, the new tariff rate on India was revealed to be a staggering 50 percent, potentially one of the highest rates imposed by the United States globally.
The sudden reversal in Trump's stance appears to be influenced by India's relationship with Russia. India has continued to import Russian oil and has provided military parts and weaponry to Russia amid the ongoing conflict in Ukraine. Trump’s tariffs seem to serve as a punishment for this relationship, especially as he allows other nations to engage in trade with Russia without similar repercussions. Notably, China, which imports more Russian oil than India, was given an extension to negotiate a deal just before the tariffs were imposed on India.
Historically, the India-Russia relationship has aligned with U.S. interests. As European nations placed sanctions on Russian oil, India’s ability to procure cheap crude oil and subsequently process it for export to Europe was viewed favorably by some in the U.S. However, this past cooperation now seems to be a source of frustration for the current administration. Ashley Tellis, a senior fellow at the Carnegie Endowment for International Peace, noted that what was once acceptable for India now raises concerns for the Trump administration.
Another factor contributing to the changing dynamics may be personal grievances from Trump regarding India’s actions during the India-Pakistan conflict last May. India’s refusal to acknowledge Trump’s role in mediating a ceasefire reportedly left Trump feeling unappreciated, leading to a shift in his perception of India.
Moreover, Trump's administration is influenced by economic conservatives like Peter Navarro, who have long criticized India's protectionist policies, and anti-immigration advocates such as Stephen Miller, who view India as a major beneficiary of the H-1B visa program. This combination has intensified scrutiny of India, complicating Modi’s position.
As Modi grapples with these punitive tariffs, he faces a delicate political situation at home. One of Washington's primary demands is for India to open its markets to U.S. agricultural products and dairy. However, such moves could alienate a vital voting bloc: Indian farmers, who constitute around 45 percent of the country's labor force. Historical resistance to changes in agricultural policy, such as the backlash against Modi’s attempts to amend farming legislation in 2020, serves as a cautionary tale for the government.
The cultural context also plays a significant role; importing U.S. dairy products, which may not align with Hindu dietary practices, poses additional challenges for Modi's administration. The political ramifications of any concessions could be dire, as opposition figures have already labeled the tariffs as “economic blackmail.”
As Modi attempts to navigate the turbulent waters of U.S.-India relations, he has encouraged citizens to support local products with initiatives like “Vocal for Local.” However, skepticism remains regarding the effectiveness of such rhetoric. In 2020, Modi's call for self-reliance in response to rising tensions with China did not prevent a significant increase in imports from China.
Looking ahead, it seems likely that India may gradually reduce its purchases of Russian oil, not solely due to Trump’s tariffs but to signal a willingness to cooperate with the U.S. However, Indian officials will likely approach this shift cautiously to avoid appearing submissive to U.S. demands.
While India may withstand the immediate effects of increased tariffs, the long-term implications could significantly impact its GDP growth, with some estimates suggesting a potential decline of one full percentage point. The intricacies of U.S.-India relations, cultivated over decades, may face unprecedented challenges as both nations navigate their strategic interests.
As India continues to balance its historical nonalignment with the pressures of contemporary geopolitics, the future of its relationship with the United States remains uncertain. With Modi’s government now facing strategic dilemmas, the evolving landscape could reshape not only U.S.-India ties but also the broader geopolitical dynamics in the region.
