Nobody in India could have anticipated that Donald Trump’s second presidential term would present such formidable challenges to the country, both strategically and economically.
The personal rapport Prime Minister Narendra Modi had cultivated with Trump during his first term was unprecedented. Modi had even appeared to campaign for him and hosted a massive event in Ahmedabad. This time, special prayers were held, and 'hawans' performed across India in hopes of Trump’s re-election. His victory had sparked considerable euphoria throughout the country.
Despite the evolving dynamics, Indo-US relations are not yet strained. Trump has not targeted India with any exclusive tariffs or duties. His administration’s trade measures have been applied globally, affecting even longstanding allies such as Canada and Japan. Trump continues to refer to India as a “friend” and has called Modi his “friend” too. However, his administration’s overtures towards Pakistan remain a source of discomfort in New Delhi.
Trump’s strategic calculus with Pakistan stems from efforts to balance Chinese influence in South Asia, given Beijing’s entrenched investments and infrastructure in the country. Suggesting that Indo-US ties are deteriorating would be a misreading of the situation, which is largely global rather than India-specific.
Trump’s trade policies may appear punitive but are not selective. Even close allies like Japan and South Korea have been impacted. It would be unrealistic to expect exemptions for India based solely on diplomatic goodwill.
Within the Trump administration, there are influential pro-India voices, most notably Secretary of State Marco Rubio. While Rubio may not override Trump’s decisions, he wields considerable sway over foreign policy discussions. A longstanding supporter of India, Rubio has argued that India deserves treatment on par with allies such as Japan, South Korea, Israel and NATO nations. Trump, at least on tariffs, appears to be following that logic.
In July 2024, Rubio introduced the ‘United States–India Defence Cooperation Act of 2024’ in the US Senate. The bill seeks to enhance defence, military, and economic cooperation between India and the US. It also contains provisions requiring congressional reports on Pakistan’s use of terrorism and proxy groups against India, especially in Jammu and Kashmir. The bill further proposes cutting off US security assistance to Pakistan if found guilty of sponsoring terrorism against India.
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The bill was referred to the Senate Foreign Relations Committee. Now, with Rubio holding the powerful post of Secretary of State, its chances of passage would ordinarily seem bright. Yet, considering current geopolitical uncertainties, the bill could be delayed or even shelved.
Nevertheless, India can reasonably expect Rubio to advocate a strategic South Asia policy favouring India’s rise as a counterweight to China. His commitment to this cause remains evident, although how much influence he can exert on Trump moving forward remains uncertain.
For Modi, the scenario presents a serious test. Now in his third term, with a reputation as one of India’s most influential leaders globally, Modi faces heightened expectations at home. The new tariff regime is a blow, likely to affect economic growth and job creation.
While Modi had launched ‘Make in India’ and ‘Atmanirbhar Bharat’ campaigns much earlier, these initiatives have yet to yield transformative results. However, the current challenges could galvanise a more focused push. With a vast domestic market and a burgeoning middle class, India can potentially absorb the impact through increased self-reliance.
These tariffs, while challenging, offer a silver lining, an opportunity for India to deepen its domestic manufacturing and consumption base. Modi, with his mass appeal, can drive a campaign encouraging Indians to buy locally produced goods. India has both the production capacity and consumer demand to support such a pivot. Moreover, the US is not India’s only trading partner; alternative markets are available.
On the investment front, Modi’s government can consider offering incentives to retain companies like Apple, which were among Trump’s main tariff targets. Trump has already threatened Apple with relocation demands and has now imposed tariffs. India, in turn, could neutralise the financial impact of these tariffs with strategic incentives such as tax holidays to retain Apple’s operations in India. It would be economically wiser to keep such manufacturing hubs within India than to lose them to tariff pressures.
If Trump can impose tariffs, Modi can counteract with equally potent domestic measures. The situation, while testing, is far from unmanageable. Leadership is best defined in the face of adversity, and Modi has demonstrated resilience before.
What is essential now is a united front. Modi must act not only as BJP’s leader but as the leader of the nation. To build a comprehensive national response, he may need to engage the opposition and seek consensus across party lines. In a moment of economic and diplomatic strain, domestic unity could be India’s strongest asset.
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