Tensions over tariffs threatening to disrupt Indo-US relations
By Abdul Hadi*Following the collapse of the Soviet Union, US-India relations were stable and expanding until President Donald Trump imposed tariffs of up to 50% on Indian imports, which strained ties.The move came after months of failed negotiations over tariffs and was exacerbated by New Delhi's continued reliance on Russian oil in defiance of Western sanctions on Moscow over the war in Ukraine.The decision reflected Washington's effort to pressure countries trading with Russia, and it was consistent with the 'America First' policy, which seeks to reshape global trade in ways that favour American products and strengthen domestic industries.India-US relations improved in the 21st century after decades of Cold War tensions. The civil nuclear energy cooperation in 2005 marked a major milestone, under which the US Nuclear Suppliers Group granted India a concession to start civilian nuclear trade.In the years that followed, the US-India security partnership deepened, driven by growing shared concerns over China's expanding presence in South Asia and the Indian Ocean.In the defence sphere, the United States is a major arms supplier to India. In 2016, Washington designated India as a 'major defence partner'. Between 2016 and 2019, the two countries signed several defence cooperation agreements.In 2020, the United States and Australia expanded their geographical definitions of the Indian and Pacific Oceans to match those of India and Japan. This development followed trilateral dialogues among India, Japan, and the United States, as well as quadrilateral discussions involving India, Japan, the US, and Australia.The establishment of a '2+2' dialogue between the foreign and defence ministers of India and the US, along with joint military exercises and manoeuvres, further deepened the strategic partnership within the Quad coalition.Relations have come under strain after Washington imposed a 25% tariff on Indian goods, which was on expected lines, but the possibility of an additional 25% increase as sanctions for buying Russian oil by the end of August is very strong.This would rank among the highest tariff rates imposed on any US trading partner. Meanwhile, bilateral trade exceeded $128 billion in 2024, with India enjoying a surplus of about $46 billion, a trade imbalance that the US president is seeking to redress.India has responded calmly to US policies and statements while defence relations between New Delhi and Washington remain on a cooperative path. The 21st session of the annual joint 'Yudh Abhyas' ('War practice' in Hindi) military exercises is expected to take place from September 1-14 in Alaska.This reflects a bilateral vision based on each side securing certain gains while navigating trade issues. While the Indian government has said it will look after its own interests in buying cheaper oil from Russia, 'America First' policy also continues to be the Trump administration's priority.The tariff agreement seems to be faltering due to the nature of India's economic activities, particularly in the agricultural sector, which employs nearly 40% of the country's workforce.The initial 25% tariffs will affect more than one-third of Indian exports to the US, including pharmaceuticals, automotive products and electronics. The measures would harm the competitiveness of India's major exports, especially agriculture, textiles, gemstones and jewellery.India is one of the world's largest emerging economies and relies heavily on oil imports to meet more than 85% of its energy needs. Washington remains a key partner for India in technology, defence, and energy.New Delhi's ties with Moscow are not an endorsement of the war but rather driven by its need for Russian crude, which has also contributed to stabilising global energy prices.India is pursuing a diplomatic course in its efforts to strike a delicate balance between its national interests and international pressures, and negotiations are still on. Trump, for instance, has said Apple's iPhones, which are being made in India, will be exempt.The tariff agreement will depend on the ability of US and Indian negotiators to reach compromises that preserve their partnership. However, US policies could create more rifts in their bilateral relations, particularly if the two sides fail to agree on an alternative to the 50% rate. New Delhi may be forced to look for other allies and options.
*The writer is a columnist of TRENDS Research & Advisory
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