Prime Minister Narendra Modi’s visit to the US for talks with President Donald Trump will have vital implications for the future of India-US bilateral partnership, which is further likely to have global implications too. Upcoming discussions between the two leaders will centre on defence cooperation, trade relations, and countering China’s growing economic and military influence.
When it comes to Trump, Modi is no stranger to grand gestures, and his embrace of Trump during his first elected term was no exception. From bear hugs to packed stadiums and rousing speeches, Modi has consistently bet big on personal diplomacy – a strategy that has yielded significant results.
However, believing that his warmth toward the US president would shield India from Washington’s hard-nosed economic nationalism may have been overly optimistic. While Modi leaned on personal rapport to influence trade dynamics, Trump had a different playbook in mind.
Trump never spoke of India in terms of a true partnership; rather, his rhetoric was steeped in the language of power. He described India as “smart,” “tough,” and “sharp” – words that were less about praise and more about acknowledging India as a formidable competitor in trade.
For Trump, trade is a weaponised tool, less about mutual benefit and more about strategic leverage – a perspective that often left India on the receiving end of tough negotiations.
India has already sought to rationalise duties and tariff barriers, and is considering slashing duties on select American goods in an attempt to smoothen ties. Proposed tariff reductions on products such as motorcycles, steel, and electronic items signal a calculated effort to defuse potential trade frictions.
Notwithstanding the announcements made in the Union Budget, this move presents a crucial policy dilemma: should India make strategic concessions to secure long-term diplomatic gains, or should it maintain a protectionist stance to safeguard domestic industries?
For India, a well-calibrated trade policy must strike a balance between import substitution and targeted liberalisation. A hybrid approach – leveraging tariffs to nurture nascent industries while gradually easing restrictions on high-value imports – could enhance competitiveness without deterring foreign investments.
At present, India imposes duties exceeding 100% on more than 20 imported items from the US, a structure that may soon require reconsideration. Successfully navigating these complexities will determine whether India solidifies its position in the global trade arena or finds itself struggling against shifting economic tides.
Modi’s gamble
For decades, Trump has championed tariffs as the ultimate economic weapon, believing they can strong-arm countries into submission and secure better trade deals. While he approaches the use of similar tactics with BRICS nations, the reality is far more complex.
Rather than strengthening domestic industries, tariffs often disrupt global supply chains, inflate consumer costs, and provoke retaliatory measures. The US-China trade war is a prime example, and India has not been spared either. With Trump’s “weaponised tariffs” reshaping global commerce, Indian exporters have faced heightened costs, restricted access to key markets, and unpredictable trade policies that complicate long-term economic planning.
The irony of protectionism is that it frequently backfires on the country imposing it. Higher tariffs mean increased prices for domestic consumers and businesses, contributing to inflation and diminished competitiveness. India, too, has found itself caught in this cycle, raising duties on American goods in retaliation.
Navigating through this tariff war by cutting duties on US imports could ease diplomatic tensions for now, which might help secure better trade terms and offer Indian consumers cheaper goods. However, this approach carries risks, particularly in vulnerable sectors like agriculture and manufacturing, where an influx of American products could weaken domestic industries.
Source: United States Census Bureau.
At the heart of this dilemma is, as shown in the graph above, the fact that India-US bilateral trade has been increasing over the years, growing more than sevenfold in the last two decades alone. Yet, the unpredictability of US trade policy under Trump has made policymakers in India and around the globe more sceptical.
As this chauvinism gains global momentum and intensifies further, which will limit trade and economic interactions, India faces a crucial decision on whether it should shield itself from global volatility or pivot toward a more proactive trade strategy.
Economists like Dani Rodrik argue that excessive reliance on global trade leaves countries vulnerable to sudden economic shocks, something that Trump’s tariffs have demonstrated all too clearly. While Washington views India as a key ally, it is in India’s best interest to maintain strategic autonomy.
This means strengthening economic ties beyond the US and reducing its dependence on any single trade partner. Diversifying trade relationships with Europe, Southeast Asia, and Africa, while simultaneously investing in domestic resilience, could help India navigate an increasingly fragmented global economy. The challenge lies in balancing deeper engagement with the US without becoming overly reliant on it.
India’s window of opportunity
Donald Trump’s presidency can easily be marked as one driven by unpredictable politically convenient decisions, many of which reveal opportunities for India. Take the TikTok ban saga, for instance. Initially branded as a threat to U.S. security, TikTok was slated for a complete shutdown unless acquired by an American company.
However, after heated rhetoric and executive orders, the decision fizzled out, leaving TikTok operational in the US. The backpedalling wasn’t rooted in new evidence or legal clarity but rather shifting political priorities. It’s a pattern: Trump’s decisions often catered to what gained the most public support or aligned with his voter base’s sentiments, regardless of earlier commitments.
This inconsistency is not limited to TikTok. In this last term Trump railed against China’s trade practices, North Korea’s Kim Jongun for his nuclear belligerent activities but later again praised both of them when it suited negotiations.
For India, Trump’s track record of contradictions and opportunism is an opening. It suggests that the US, under such leadership, isn’t guided by steadfast trade principles but by the art of deal-making. This creates a scope for India to pitch a unilateral trade agreement tailored to mutual strengths in key sectors like technology, clean energy, and pharmaceuticals. India’s prowess in IT and affordable medicine production aligns perfectly with American needs. Clean energy cooperation, amid growing global focus on sustainability can further strengthen ties.
Keeping this in mind, India must approach this strategically, knowing US priorities shift with political winds. A long-term trade strategy resilient to political cycles is only a 50-50 bet. Instead of retaliatory tariffs or reactive diplomacy, India can offer stability which helps both nations.