Trump Doesn’t Have as Much Leverage over India as He Thinks

By Dominic Pino

Monday, August 11, 2025

 

India was a leader of the Non-Aligned Movement during the Cold War, which meant in many cases that it was functionally pro-Soviet. The U.S. has typically had much closer ties with Pakistan, despite that country’s support for terrorism. Pakistan has been designated a major non-NATO ally of the U.S. since 2004.

 

Trump has not helped himself by repeatedly taking credit for mediating an end to the flare-up in India-Pakistan tensions earlier this year. In 1972, after the third Indo-Pakistani war, the two countries signed the Simla Agreement, which said they would “settle their differences by peaceful means through bilateral negotiations.” That means third-country mediation is out of the question.

 

India has been very insistent on sticking to this provision of the agreement. It has rejected any offers of third-country or United Nations mediation in the long-running dispute over Kashmir, territory that both India and Pakistan claim. The U.S. likely did not play as large a role as Trump claims it did this year in cooling tensions, and India resents the implication that it needed U.S. help to do so. It especially resents that Pakistan nominated Trump for the Nobel Peace Prize, the diplomatic equivalent of internet trolling on Pakistan’s part.

 

Indian foreign policy prizes diplomatic and strategic independence over everything else. Since the British left in 1947, India does not ever want to be perceived as submitting to Western countries. When it aligns with the West, which it does from time to time, it does so of its own accord, not because the West demands it. That is, at least, how Indian policymakers want their decisions to be perceived in public.

 

U.S.-India relations were at an all-time high mark in recent years. Trade between the two countries was one of the indicators of this strengthening relationship. Total trade in goods between the U.S. and India never exceeded $10 billion until 1997, and it never exceeded $20 billion until 2004. Last year, total trade in goods was $129 billion, up by $37 billion just since 2019.

 

On top of that, there was $83 billion in services trade between the two countries in 2024. While the U.S. imports more goods from India than it exports to India, services trade was almost perfectly even. The U.S. is India’s largest export market for both goods and services.

 

Trade has been able to increase in part because India undertook an economic liberalization program in 1991. India historically had a very closed off market to international commerce; it sought to pair economic independence with its foreign policy independence. Under Prime Minister P. V. Narasimha Rao and Finance Minister (and future prime minister) Manmohan Singh in 1991, India removed many government barriers to its economic progress. India’s economic stagnation was once treated as a subject of bewilderment by economists, who demeaned the “Hindu rate of growth”; today, India is the fastest-growing major economy in the world.

 

As the Indian economy has grown to be the world’s fourth largest, so have the opportunities for trade with the U.S. On top of that, it has been a bipartisan priority to strengthen the U.S.-India relationship for U.S. strategic purposes. India and the U.S. share a common adversary in China. When Prime Minister Narendra Modi visited the U.S. in 2023, the two countries made major strides on defense production cooperation.

 

The headline-grabbing agreement at the time was that GE would co-produce jet engines in India for use in India-built fighter planes. A conference hosted by the U.S. Chamber of Commerce before Modi’s visit included a keynote address from the U.S. secretary of the air force. Bilateral defense trade was essentially nonexistent 15 years ago and has grown to over $20 billion per year.

 

India is one of the world’s largest arms importers, and Russia has historically been its major supplier. Increasing defense trade with the U.S. was a good way to ease India away from reliance on Russia, while Indian leaders could say they were acting independently. Both sides could win.

 

India is not going to completely leave its relationship with Russia, however. It is not interested in being a full member in good standing of the Western alliance. In fact, it resents describing its international relationships as “alliances” at all, preferring weaker terms such as “partnerships.” It sees itself as a rising world power that will displace portions of the current global diplomatic order as its economic and military might grow.

 

Russia has also been helpful to India diplomatically for decades. Crucially, as a permanent member of the U.N. Security Council, the Soviet Union and now Russia have always vetoed resolutions on Kashmir that India opposes.

 

There is also the simple reality, as India’s minister of external affairs S. Jaishankar explained in 2023, that the war in Ukraine has isolated Russia from the West, meaning it must turn east for its relationships going forward. That includes turning to India, and India is not in a position to rebuff those advances.

 

Jaishankar also said he does not view the tightening U.S.-India relationship as being primarily about China, unlike many U.S. observers and policymakers. He said he has seen the relationship grow independently from anything going on with China, which implies that he could also see it souring independently from anything going on with China.

 

India and China have a border dispute in the Indian state of Arunachal Pradesh, in the Himalayas, and India views China as a long-term civilizational rival. At the same time, India is a member of the China-led Shanghai Cooperation Organization, and Modi is planning to visit China for the first time in seven years following the trade blowup with Trump.

 

About That Trade Blowup . . .

 

Trump announced 26 percent tariffs on goods from India as part of his so-called reciprocal tariffs on April 2. That rate was later modified to 25 percent, where it currently stands. Then, Trump issued a separate executive order on August 6 imposing an additional 25 percent tariff on Indian goods because India has been purchasing Russian oil. That brings the total U.S. tariff on most Indian goods to 50 percent.

 

That means U.S. tariffs on Indian goods are now among the highest for any country. They are higher than the 30 percent base rate that the U.S. agreed to with China, even though China buys more Russian oil than India does.

 

There’s also the issue that Pakistan is much closer with China than India is. Pakistan has been an avid participant in China’s Belt and Road Initiative, receiving billions of dollars’ worth of infrastructure development and public-private business partnerships. China is Pakistan’s largest trading partner and by far its largest arms supplier.

 

If Trump’s trade strategy is supposed to be about getting tough on China, it makes no sense to be harder on India than on Pakistan. Yet Pakistan was able to secure a lower tariff rate of 19 percent from the U.S. after trade talks.

 

Pakistan also imports oil from Russia, albeit far less than India does. But Pakistan’s finance minister said in March that he wants to increase those imports and cooperate with Moscow to build a steel mill in Pakistan. Indians have noticed the double standard.

 

The European Union, too, still imports natural gas from Russia. The key difference is that the EU is phasing down its Russian energy imports with a goal of eliminating them entirely by 2027. India has made no such promise. On the contrary, it has said it will continue to import oil from Russia.

 

India plays the poor country card to justify its continued imports. Russian oil trades at a discount on global markets, in part because the West doesn’t want to buy it. So India gets a good deal on energy for its poor population that needs it.

 

While that may be understandable in economic terms, it contradicts India’s self-image as a rising power with a fast-growing economy. It’s hard to take India seriously when it talks about its ascending economic development when it also says it has no choice but to buy cheap energy from Vladimir Putin because it has hundreds of millions of poor people.

 

It does, however, happen to be true that India has hundreds of millions of poor people whose lives would be made much better off by access to cheap energy. There ought to be an opportunity for the U.S. here. The Trump administration is proud of U.S. leadership in energy, and Secretary of Energy Chris Wright has been an evangelist for the benefits of cheap energy in lifting people out of poverty. The U.S. should be doing everything it can to increase Indian access to energy, including exporting oil and natural gas from the U.S. and helping to build infrastructure and develop India’s own natural resources.

 

Trump’s use of tariffs as a one-size-fits-all solution isn’t going to help. Because the U.S. is India’s top export destination, it might seem like the U.S. has a lot of leverage to change India’s behavior, but it doesn’t. Despite the liberalization since 1991, India still does not have a very trade-oriented economy. Goods exports to the U.S. only account for around 2 percent of India’s GDP, and services exports aren’t directly affected by tariffs at all.

 

The PHD Chamber of Commerce, an Indian business group, estimated that the 25 percent “reciprocal” tariff would have a negligible impact on Indian GDP growth. That was written before the additional 25 percent tariff, but even if the estimated GDP hit was doubled (which it wouldn’t be due to diminishing marginal effects), it would still be less than 0.4 percent.

 

For decades, the Indian government sustained much larger hits to its potential GDP for the sake of economic and foreign policy independence. It is good for the Indian people that it is less willing to do so today. But it isn’t going to be thrown off its foreign-policy course by economic bullying from the U.S.

 

India can find other buyers of its exports, and the U.S. tariffs create an incentive for the Indian government to do so. India just concluded a free-trade agreement with the U.K. earlier this year. Some of the other obvious alternatives would include Russia, China, and Brazil, none of which would be in the U.S. national interest.

 

India, understandably, feels unfairly singled out by Trump for its purchase of Russian oil. The tariffs Trump has imposed on India undermine the purported focus on China that is supposed to undergird his trade policy. And they are unlikely to achieve the desirable goal of weakening India’s relationship with Russia and strengthening its relationship with the U.S.