Can Trump be trusted? The question persists in New Delhi despite lowering of tariffs and announcement of an interim framework trade agreement. And that’s because while a lot still rests on the India-US relationship, the past year has reintroduced doubt and political risk for India – or any Indian politician – to be fully invested in Washington. At the least, an insurance policy is now a must.
In many ways, it’s a reflection of changing geopolitics that started with China’s assertiveness translating into military aggressiveness through 2010-20. This was accompanied by China’s weaponisation of trade and supply chains, resulting in economic upheaval that made dependency on China a security threat to almost every important economy.
But still, a coordinated response with the US as fulcrum was developed through Quad and other initiatives, which sought to look at diversification of supply chains, secure a China-minus alternate tech ecosystem as well as establish robust defence arrangements to rebalance the China threat. Trump 1.0 had led this challenge. Trump 2.0 moved to adopt a different approach and became the disruptor himself.
This had an unexpected destabilising impact on India, which had started to politically and economically count on the US. Worse, Trump made it look that India was one of the conflict blips in his radar as he set out to disbalance the world, instead of rebalancing it.
That said, the quiet India-US diplomacy through all the turbulence – especially proactive efforts of new US ambassador Sergio Gor – that led to reduction of tariffs imposed last year, and a potential trade deal, is a big plus. It re-establishes India’s economic and strategic salience. But the political wariness will take time to subside due to the climate of distrust created in 2025.
First, imposition of the initial 25% tariff. Then, the even-handed approach with Pakistan post-Op Sindoor, further buttressed by commercial off-ramp dealings with the Pakistani army, overlooking its terror sponsorship role. And, finally, coming down on India with additional 25% tariff over Russia. Together, Trump had put the spotlight on three domestically sensitive political issues for India: Pakistan, economy, and national pride over strategic autonomy.
The last bit also covers Russia as it’s built on a long-held idea of Indian nationhood that the West cannot dictate India’s choices. The 50% tariffs underlined the non-reliability of the West. The Pakistan tilt conveyed duplicity. As a result, from a ‘trust and verify’ approach, India went on to adopt a ‘distrust and diversify’ template.
The deal with the US is to be seen in that context – since the last 13 mths are basically about four major trade deals (UAE, Britain, EU and US), one war, and a strategic budget. All of them underline one message: urgency for diversification.
There are two elements to this: options and leverage. Unlike China, it was clear when Trump decided to shift gears that India didn’t have similar leverage by way of controlling supply chains, or rare earths and critical minerals. Which is why Washington couldn’t hold a gun to Beijing’s head for buying Russian oil as it sought to with New Delhi.
So, India had to play options. Which it did by way of building as many bilateral trade deals, the EU one possibly having the US rethink on stalling the India-US deal any further.
Building leverage is the next step. Rather than getting caught in the polemic around Russian oil purchase assurances, India must take its 2025 strategy to the next stage by trading more aggressively with the US. Remember, Washington had exempted two areas where India has some leverage – pharma and consumer electronic goods – from Trump tariffs. In fact, India recording a rise in exports with the US because of these two segments shows a way forward.
As for Russian oil, it’s a declining procurement trend that’s unlikely to reach a zero, or thereabouts. But the larger fact is that oil prices are quite competitive in a supply-surplus market. India, as among the biggest consumers, has options it can deploy to serve its interests.
The question for the US would be to make its supplies easily available and competitive. Which is where the trade deal will help. Defence, energy and aviation purchases will have to be seen in tandem, for India will want military edge from the US in terms of loosening end-use controls and locating more in India as it looks to meet the $500 bn purchase target at hand.
Finally, there’s India’s challenging security environment. Op Sindoor revealed the almost seamless interoperability between Pakistani and Chinese armed forces, and how Rawalpindi will be the primary beneficiary of an increasingly sophisticated Chinese military industry. Add to this the uncertainty over the US approach towards Pakistan, and India has a looming, complex security problem like no other.
India clearly needs to invest more in matching weaponry, much of which will take time to build supply chains here. This explains the hefty hike in this year’s budget for defence capex. Here, too, though not ideal for any military, India will have do with a diverse equipment profile – American, Russian, Israeli, French, German – besides encouraging indigenous production.
So, diversification and building redundancies form a necessary survival strategy in a global ecosystem of distrust. For India, this would mean taking calculable risks in a geopolitical ‘futures and options’ market, while quietly building leverage for the long term. Because, eventually, that’s what holds the key.