Tuesday
October 7, 2025

India-US Relations: A Strategic Reckoning

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By: Kashif Anwar

India & USA flags: source Internet

Table of Contents

The Pahalgam terror attack and Operation Sindoor which highlighted the nature of India-Pakistan relationship and India’s military capabilities was followed by a period of uncertainty and unease in the Indo-US relationship. Despite enjoying a healthy Indo-US relationship and meeting between India’s PM Narendra Modi and the US President in February 2025, recently the Indo-US relationship continued to face litmus tests. The developments post Operation Sindoor like growing relationship between the US and Pakistan, increasing US involvement in South Asian geopolitics and US tariff threat to allies, partners and friends worldwide have made India worried. Such developments and geoeconomic challenges from the US reflect heightened concerns regarding the Indo-US comprehensive global strategic partnership; a status-quo achieved in the last few years. India despite being a strategic partner of the US and vital player in the US Indo-Pacific policies, the US imposed an additional 25% tariff on India which came into practice on August 27, 2025, bringing it up to 50% – 25% implemented on August 7, 2025 and additional 25% came into effect on August 27, 2025 – which put India along with Brazil to be fined the highest tariff in the world.

 

Considering China being an adversary to the US who was spared from additional tariff by giving China a 90-days mutually agreed tariff truce till November 10, 2025, India finds itself on the hammer side. Further, Pakistan regaining the status of “phenomenal counter-terror partner” for the US, such developments not only impacted the ongoing negotiation to achieve a new Indo-US trade deal and achievement of Modi-Trump’s February 2025 meeting, it also impacted the Indo-US relationship and created new strategic challenges for India. Amidst all this India shifts to further recalibrate its bilateral relationship with Russia and China and position within BRICS grouping. As the current situation offers India some opportunities, on the other hand, the implementation of heavier tariffs on India impacts its position from a comprehensive global strategic partner for the US to a coercive economic actor that could affect the India-US ties.

 

Trump’s Ceasefire Narrative and India’s Rejection

As US President Trump claimed, since he assumed office, he has stopped six conflicts worldwide, and such claims from him are seen as spreading misinformation and taking credit. On 12 May 2025, he claimed that “a couple of calls” from his end also stopped the India-Pakistan fighting and sees it as the first war he stopped as the US President. Although India immediately rejected such assertions and claims, on the issue, External Affairs Minister S. Jaishankar clarified that during the four-day conflict, all the conversations with the US were “routine diplomatic exchanges, not negotiations”. Further, there was no US or third-party involvement, and the ceasefire – after intense, strategic and calculated air warfare – was reached through “direct military channels” between India and Pakistan.

 

In this regard, India’s rejection of US involvement to secure a ceasefire between India and Pakistan is based on three main premises. Firstly, India’s acceptance of the US involvement in the ceasefire process would have legitimised third-party mediation on Kashmir, which could have violated India’s long-standing red line. Secondly, Trump’s narrative, which equated a democracy responding to cross-border terrorism with a state accused of sponsoring it, was seen as a means that would allow the US to take credit for the ceasefire. Thus, acceptance of US involvement would have also blamed India for the situation, as such a claim could have blurred the distinction between the victim and aggressor on the world stage. Lastly, domestic politics further amplified the sensitivity and opposition parties who accused the government of “diplomatic surrender”; therefore, the Indian government’s acceptance of the US offer or mediation was politically costly.

 

US Tariff Coercion and the Collapse of Trade Assurances

Following such claims and India’s rejection, the relationship between the US and India remains focused on the purchase of the F-35 versus the Su-57 fighter jet, growing geoeconomic challenges and threats due to the US tariff threat. As the US set 1st August as the deadline for many nations, including India, to sign a trade deal or face steep tariffs after the deadline, it pushed both countries to hold a series of negotiations, which are still in process, to achieve a trade deal. However, on 6 August 2025, President Trump imposed an additional 25 per cent tariff on Indian exports, which raised import duties on affected Indian items to 50 per cent. It also placed India next to Brazil, with both nations being imposed the highest tariff among all the US trading partners. As the US continues to face challenges from China, the new tariff was imposed on India which will impact the India-US relations and strategic partnership which was achieved in recent years. The US Presidential executive order explicitly mentioned India’s continued import of Russian oil worth US$52 billion in 2024 as justification for the decision to impose additional tariffs on India. On the other hand, it omitted comparable Chinese purchases of US$62.6 billion from Russia, which met 20% of China’s energy demand in the same year.

 

As a result of such tariff imposition, the economic implications are severe for India, and the development is viewed as a serious concern. As India currently enjoys a trade surplus with the US; the new tariffs will have an inimical impact on India’s key export industries, economic growth, and broader trade relationship with the US. Considering India’s merchandise exports to the US in 2024 were US$87 billion, and sectors such as textiles, footwear and gems and jewellery now confront a 30-35% competitiveness gap relative to Bangladesh, Vietnam and Japan. The Federation of Indian Export Organisations warns that as a result of additional tariffs on India, 55% of US-bound shipments will be disrupted, impacting around US$48.2 billion worth of India’s merchandise exports.

 

It is estimated that a protracted tariff regime could shave 0.5 percentage points off India’s FY 2025-26 GDP growth and also pull India’s GDP below 6%. From a political and geopolitical perspective, this move has significantly impacted the Modi-Trump understanding, which was reached on 13 February 2025, aiming to achieve an “early harvest” trade package and to raise bilateral trade to US$500 billion by 2030. An additional 25% tariff on India will take effect on 27 August, casting a shadow over the next round of negotiations between India and the US, happening on 25 August with new hope arising recently. Such a delay in imposition and proximity to the next negotiation date highlight and are seen as a US strategic move to create a negotiating window and pressurise India, which could also impact the India-US defence relationship in the coming times.

 

US-Pakistan Rapprochement and South Asian Realignments

As a result of Operation Sindoor and the US imposing heavier tariffs on India, the geopolitics of South Asia underwent a dramatic transformation, with the US and Pakistan working to deepen their bilateral relationship. Following the operation, the US Department of State described Pakistan as a “phenomenal partner” in counter-terrorism, and subsequently, Pakistan’s Army Chief, General Asim Munir, was invited to attend the US Army’s 250th anniversary parade on 14 June 2025. Such an invitation and development have not only symbolically reversed years of limited senior-level contact between the nations. Pakistan PM Shehbaz Sharif, who acknowledged Trump’s “pivotal and paramount role” in achieving a ceasefire between Pakistan and India, was welcomed by President Trump and allowed Pakistan to secure favourable economic treatment from the US.

           

For India, who sees such gestures as a confirmation that US strategic interests in Pakistan – supply routes to Afghanistan and leverage over the Taliban – remain intact, which will have direct implications for India’s South Asia policy. In this regard, reports in the Indian press allege that US agencies’ cultivation of the Bangladeshi student movement has resulted in Sheikh Hasina’s resignation on 5 August 2024; however, conclusive evidence remains absent. Further, the developments taking place in Bangladesh under the interim government of Mohammad Yunus, the improvement in relations between Pakistan and Bangladesh, Pakistan and the US, and Bangladesh and the US has made India cautious.

 

India’s Pivot to Russia, China and the BRICS Pathway

At a time when geopolitics in South Asia and bilateral relations between India and the US are changing, India’s recent strategic pivot toward Russia, China and BRICS reflects a calculated response to evolving geopolitical pressures and opportunities for diplomatic diversification. In this regard, Prime Minister Modi’s scheduled visit to China for the SCO Summit on August 31 and September 1, clearly marked a significant improvement in India-China relations. Further, Chinese Foreign Minister Wang Yi’s visit to India on August 18, 2025 and met NSA Ajit Doval and PM Modi and also extended an invitation to PM Modi to attend SCO summit in Tianjin. As result of such meeting which witnessed development to resolve tension along the Line of Actual Control and begin groundwork to delimit to adopt non-offensive military posture along the border and work toward achieving permanent demarcation by resolving long-standing border dispute. Such development and progress are seen in the right direction which will allow India and China to further reduce tension along the Line of Actual Control and potentially resume trade and achieve pre-Galwan bilateral relations.

 

In recent times, as India and the Indian Air Force are engaged in a drive to address the declining number of squadrons which will be reduced to 29 from 31 after the retirement of Mig-21 Bison by the end of this year. As India aimed to have sanctioned 42 squadrons to face any future two-front war in near future it once again put light on the current state of Tejas jet, Kaveri engine, AMCA programme and relation with other nations to acquire advanced fighter jets. In this regard, as first half of the 2025 was filled with F-35 versus Su-57 debate, and considering India’s reliable defence partnership with Russia and renewed Indo-Russian relation post Trump’s 50% on India, Su-57 will be back on the table during Russian President Vladimir Putin visit to India in December, 2025. With Russia offering a potential defence deal to India which is compelling, India is still weighing the scale which includes planning to acquire more Rafael and how to ensure defence cooperation and relations with Russia continue without raising alarm in the West.

 

Lastly, as the role and position of India within BRICS and QUAD frameworks have been solidified in recent years. In the case of BRICS, on the issue of de-dollarisation and securing its bilateral trade and national interest India has started to embrace alternative financial mechanisms like saw the use of Rupees to conduct trade with Russia and around 30 countries including BRICS members showing interest in using Rupees as a form of payment in 2025. Further, since 2022, the Reserve Bank of India has been signing direct settlement agreements allowing transactions in rupees without dollar conversion by using Special Rupee Vostro Accounts (SRVAs) mechanism which have been further streamlined recently. However, whether India has accepted or approved the de-dollorisation, statements from the Indian government recently stressed it isn’t a part of India’s financial agenda, rather sees it as a way which allows India to diversify payment and trade relations with its partners and also reduces India’s risk amid rising US tariff threat.

 

Such strategic initiatives clearly represent India’s pragmatic hedging approach to leverage partnerships with both authoritarian and democratic powers to maximise economic benefits and strategic autonomy and also maintain flexibility in an increasingly growing multipolar world order. With the latest US tariff being active, it could impact India’s surplus trade with the US – US$ 45.7 billion in 2024 as per the US Census Bureau and stand 10th and next to Canada with US$ 63.3 billion – pushing the Indian government to cover up the losses and mitigate the impact India is working to boost domestic demands, provide sectoral support and is engaged in strategic diplomatic engagement. Such an approach and financial mechanism will enable New Delhi to diversify dependencies without completely abandoning existing Western relationships and provide India a wonderful opportunity to revive the RIC – Russia India and China – trilateral forum which will strengthen India’s balancing act.

 

Implications for the Quad, De-dollarisation and India’s Strategic Options

Considering, the Indo-US relationship is going through a rough phase recent statement from Peter Navarro, Senior Counselor for Trade and Manufacturing to US President Donald Trump made a startlink remark on the Russia-Ukraine conflict that if India stops buying Russian oil, it can get 25% off tomorrow and sees it as a ‘Modi’s War’. In the wake of such a situation the RBI has stated it is ready to step in to support the economy and engage with the industry, and on the other hand, if a situation arises and becomes a necessity a senior government official from the Indian government state India may relax certain FDI restrictions on Chinese investment to further improve bilateral relationship.

 

In such a situation, the issue of QUAD, de-dollarisation and India’s strategic options come into the picture. The implementation of 50% tariff on Indian export to the US has further caused more difference to achieve a new Indo-US trade deal which has put 70% of India’s export to the US with textiles, gems and electrical machinery majorly affected. India, who sees the tariff as unfair, unjustified and unreasonable as it caused the worst phase in Indo-US relationship in the last two decades. With tariffs holding various geo-economic challenges and India continue to engage with the US, statement from Vikram Misri, India’s Foreign Secretary that India continues to attach a high value to the QUAD provided a respite that the 2025 QUAD Leaders’ summit which will be held in India later this year remain unharmed or impacted.

On the other hand, as India’s engagement with Russia and China have increased in the last few weeks with India strengthening its engagement with the BRICS+ members will evolve further in the coming times. Steps taken by India like SRVA and Structured Financial Messaging System (SFMS) developed by the RBI is seen as an alternative to SWIFT to conduct international transactions. As India sees such measures as a way to ease rules to promote use of Rupees-based trade with BRICS members with the Ministry of External Affairs affirming such steps shouldn’t be seen as India’s formal confirmation to adopt the de-dollarisation.

 

Such an approach adopted by India recently not only highlights that the Indian government wanted to have a balanced bilateral relationship with QUAD and BRICS members with India’s current strategy being driven by national interest and hedging approach to have multipolar engagement. For India, embracing alternative payment mechanisms through BRICS represents a calculated response apart from its relation with the US and BRICS members to have leverage. Further, regarding China, Russia and the US, India is advocating for systemic economic sovereignty driven by deeper and more sustainable countermeasures to secure India’s interest at domestic and global level and to achieve maximum strategic flexibility.

 

Conclusion

Former UK Prime Minister Lord Palmerston in his famous 1848 speech to the House of Commons when he stated “there are no permanent friends or enemies only permanent interests” which later became the foundation of political theory of realpolitik which still stand valid till today. Such a statement fits perfectly in the case of India considering how Indo-US relationships have evolved and strengthened multi-fold in the last two decades. The imposition of 50% tariff on India export to the US and improvement of US-Pakistan relationship on the other should be seen as a watershed moment in the Indo-US relationship, and India should see it as an opportunity to diversify its export with like-minded countries and also increase the acceptance and relevance of Rupee and SFMS in bilateral trade and globally respectively.

 

The current tariff which will impact trade with the US and if extended could impact India’s approach, role and outlook towards QUAD and therefore rather India should see it also as an opportunity to further strengthen bilateral relations with individual members of the group especially with Japan. Although tariff has given India an opportunity to further secure its interest to further strengthen BRICS and should see it as a vital opportunity to revive the RIC forum giving India leverage. Considering the rich history of Indo-Russian relations and meeting between PM Modi and President Putin on the sideline of 2025 SCO summit, India should see the development and President Putin visit to India later this year as an advantage. Such development will allow India to further enhance its presence in the BRICS and in the Global South geopolitics and keep its interest secured and protected while keeping a check on China. Considering the history of China who opens its door on its own terms and if the Indo-US economic relationship is back on track for India such diversification and such steps should continue as it will only secure and enhance India’s annual total export and thwart any such development in the near future. Such steps, measures and developments will allow India to navigate the complexities of a fragmented international system and assert its role as a key player in shaping the global order.

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