Rapidly Growing Distrust of the U.S. in India and the Crisis in India-U.S. Relations
--The Limits of Trump-Modi Friendship

Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non-monetary Trade Barriers of any Country. Also, they have always bought a vast majority of their military equipment from Russia, and are Russia’s largest buyer of ENERGY, along with China, at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE — ALL THINGS NOT GOOD! INDIA WILL THEREFORE BE PAYING A TARIFF OF 25%, PLUS A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST.[1]

Two days before the new tariffs were scheduled to take effect by the U.S.[2], President Trump demonstrated explicit dissatisfaction with India's stance on tariff negotiations, leading to a unilateral imposition of tariffs. Trump had always professed a firm friendship with Indian Prime Minister Modi since his first term in office[3], and Modi welcomed Trump's re-election more than anyone else. In February of this year, Prime Minister Modi was one of the first to be invited to the White House.[4] India even led Japan and the EU in tariff negotiations, and there was widespread optimism that an agreement was close to being reached.[5] So how did the present situation come to pass, despite all of this?

“Indo-Pakistani Intervention” Crossed Indian Red Line

In considering why the relationship between Trump 2.0 and Modi 3.0, which was seen as unshakable in light of the friendship between the leaders as well as their traditional strategic motivations toward China, has become strained, we need to look somewhere other than the tariff negotiations themselves, which were unsuccessful. That somewhere is what President Trump has been saying and doing since India agreed to a ceasefire with Pakistan. Operation Sindoor, launched by India against Pakistan in response to the terrorist attacks in Indian Kashmir, ended on May 10, amidst the fourth day of intensifying attacks on both sides, with both India and Pakistan agreeing to end fighting in the immediate wake of Trump posting of a "ceasefire" on his social networking site.[6]

Since then, President Trump has spread claims that the India-Pakistan ceasefire was his own achievement. In essence, Trump’s assertion was that his telling the countries that if they did not stop fighting he would stop trade (negotiations) led to a ceasefire and averted nuclear war.[7] At times, he even made statements in line with Pakistan's claims, such as that he would help find a solution to the Kashmir problem[8] and that he believed five fighter jets had been shot down.[9] With no peace in sight in Russia and Ukraine, and in the Middle East, where he had expressed confidence that he could end the war during his presidential campaign, Trump, who is said to have ambitions of winning the Nobel Peace Prize, probably wanted to use the India-Pakistan ceasefire to bolster his image at home and abroad.

However, all of these statements marked red lines that should never be crossed from India’s perspective. The Indian narrative on Operation Sindoor is that the operation was a response to terrorism from Pakistan, with no intention of escalating to nuclear war, and that the objective was achieved by hitting terrorist bases with precision. Subsequently, India maintains, Pakistan's Director General of Military Operations (DGMO) approached the Indian side and agreed to suspend operations, after India’s defenses averted counterattacks from the Pakistani side and dealt damage to military facilities.[10] Moreover, it has been the fundamental position maintained by successive Indian administrations that the Kashmir issue is a bilateral issue between India and Pakistan, with no room for third-party involvement.[11] President Trump's words and actions are a complete repudiation of this Indian narrative and position.

Naturally, the opposition parties and the media in India collectively came down hard on the Modi administration for allowing the U.S. to intervene.[12] Prime Minister Modi, who spoke with President Trump by phone on June 17, stressed that while it is true that Vice President Vance called him several times during Operation Sindoor, what he said there was that India would respond even more forcefully if Pakistan launched a major attack, and that at no point was trade or mediation discussed. In addition, he said that he stressed that India has never and will never accept mediation in the first place.[13] Trump did not, however, stop making similar claims thereafter. Trump made such claims as many as 30 times in the less than three months from the end of the fighting to the July 31 announcement of the new list of tariffs on various countries.[14] Rahul Gandhi of the Indian National Congress, the largest opposition party, spoke up in parliament, saying that if this was not true, Modi should "call Trump a liar!" Modi defended himself against this, saying, "No world leader has ever asked India to cancel an operation," while avoiding naming names.[15]

This was not all. President Trump invited Pakistan's army chief Field Marshal Munir, to the White House to thank him for helping end the war with India.[16] The Pakistani side, including Foreign Minister Dar and others who visited the U.S. subsequently, also thanked the Trump administration for brokering the ceasefire, nominated Trump for the Nobel Peace Prize,[17] and attempted to create closer relations with the U.S., from which Pakistan had recently grown estranged.

President Trump's words and actions have been seen as a return to the Cold War "hyphenation" policy toward India and Pakistan, moving away from the so-called "dehyphenation”[18] of India and Pakistan, the South Asian policy of the United States this century, which had strategically positioned India as an important partner, with no attention paid to the balance between India and Pakistan.[19] It is thus no wonder that the Modi administration, which professes to be a world power, no matter how much of a "friend" it is, has grown distrustful.

Narrowing the Room for Concessions in Tariff Negotiations

Thus, as President Trump stepped over India's red lines and appeared to tilt toward Pakistan, clouds began to gather over tariff negotiations, which had reached a critical juncture. India's position on agriculture and dairy farming, in which 40% of its working population is engaged, was originally that this was a "sanctuary" that could never be conceded. By early July, however, the Indian side had softened to the point of accepting tariff reductions on non-genetically modified U.S. agricultural products, dairy products, as well as automobiles, which are not widely produced in the country.[20] However, given the harsh domestic criticism of Trump's words and actions on the Pakistan issue, it was impossible to make any further concessions that might be seen as "bowing to pressure.” On the other hand, the U.S. side began to publicly express its frustration with Russian President Vladimir Putin's refusal to accept President Trump's Ukraine peace proposals around late April, and in mid-July claimed that it would impose 100% "secondary tariffs" on countries doing business with Russia if Russia did not agree to a ceasefire.[21] Needless to say, this would represent a major blow to India, which purchases large amounts of crude oil from Russia. As a result of Trump's abandonment of any hope of peace with Russia and his shift to a confrontational stance, India, for its part, faces blatant pressure from the U.S., even in energy procurement.[22]

This represents the biggest crisis for Prime Minister Modi since taking office. Modi had built up a strong leadership image, casting himself as a "world guru",[23] particularly touting his friendship with Trump as a strength.[24] He was thus out of room for making compromises on trade.

Is the 25% Tariff a Shock?

On July 31, a day after notifying India that it would impose a 25% tariff, the White House announced new tariff rates for various countries.[25] What shocked India was that rates on Pakistan, Bangladesh, Sri Lanka, and other neighboring countries were drastically reduced across the board (see table). In April, India's tariff rate was set at 26%, lower than that of most South and Southeast Asian countries, and it was widely believed that India could gain a competitive advantage in the U.S. market under the status quo.[26]However, there were concerns that the new tariff rates would not allow the country to compete with ASEAN in electrical and electronic equipment and with Bangladesh and Pakistan in garments.[27] China, its biggest rival, is still negotiating, but its tariff rate could be less than India's 25%.

Table: "Mutual Tariff" Rates Announced by President Trump for Asian Countries

Notes:
・A flat tariff of 10% is applied to all other countries
・Countries highlighted in orange are believed to have negotiated agreements

Source: Prepared by the author based on White House announcement and various media reports

Of course, as Indian Commerce and Industry Minister Goyal stated, India will continue to negotiate without necessarily sticking to the August 1 deadline[28], and will, in fact, have to do so given the new tariff rates in neighboring countries. Indeed, although India is at a disadvantage in terms of tariffs on exports to the U.S. compared to neighboring countries, it has not been forced to agree to almost zero import tariffs, as Indonesia and Vietnam have been, after rushing into agreements. Nor has India been forced to promise large-scale investments, as Japan, South Korea, and the EU have been. At this point, India has not sacrificed anything, and thus continues to hold cards. In this sense, some have credited this as a "declaration of economic sovereignty."[29] India will thus keep a close eye on the U.S.-China negotiations and sit down to discuss the conclusion of a bilateral trade agreement (BTA) this Fall, as agreed at the time of the summit meeting in February this year.[30]

The India-U.S. Crisis and Japan's Role

Nevertheless, the mutual trust that forms the basis for such talks has now been imperiled. A substantial reduction of tariffs to 19% was announced not only for Pakistan, but also for Thailand and Cambodia, which accepted a "Trump-brokered" cease-fire just before the new tariffs were announced. This appears to be a shot at India, which has denied President Trump's accomplishments. The U.S. has also decided to invest in Pakistan to develop oil fields, and Trump sarcastically said that one day Pakistan might sell to India.[31] He even went so far as to say, "I don't care what India does with Russia," and ridiculed India as a "dead economy" like Russia.[32] One Cabinet member also followed up with a statement that India, which continues to import Russian oil, is "not a great global actor."[33] Trump said on August 4 that India is "buying massive amounts of Russian Oil (then) for much of the Oil purchased, selling it on the Open Market for big profits" and that "they don’t care how many people in Ukraine are being killed by the Russian War Machine. Because of this, I will be substantially raising the Tariff paid by India to the USA.”[34] The White House announced on April 6 that the new additional tariff rate to take effect on April 27 would be 25%. This comes to a total of 50%.%にもなる[35]

India is a country with a strong sense of national pride and a "great power attitude," and values above all "independent diplomacy" that does not follow the dictates of superpowers.[36] The insulting remarks that began with the crossing of the red line over the India-Pakistan ceasefire and were thrust upon India with the announcement of the new tariff rate cannot be overlooked. In response to the announcement of further penalties on the country for purchasing Russian oil, India's Ministry of External Affairs issued an unusual statement saying that it was "unjust and unfair" because the West also depends on trade with Russia.[37]

The India-U.S. strategic partnership is in jeopardy, not only because of the characteristics of Modi as a leader, but also because of the nature of India as a country.[38] Already, strong opposition and hard-line arguments against the U.S. are on the rise, not only from opposition parties but also from the ruling Bharatiya Janata Party (BJP), which backs Modi, and among his support base.[39] This has the potential to turn into a great wave, depending on which way the media and public opinion go.

The deterioration of India-U.S. relations would also be a major blow to Japan's "Indo-Pacific" policy, which is mindful of China's ever-expanding influence. The Quad Summit is set to be held in Delhi this fall, but even that is now imperiled. Fortunately, Japan-India relations continue to be positive. Prime Minister Modi is scheduled to visit Japan at the end of August. Now that President Trump and Prime Minister Modi are both in positions from which they cannot back down, having wagered significant prestige, Japan is expected to play the role of "mediator" seeking to avoid a decisive clash or rift between the two sides.

(2025/09/12)