U.S. President Donald Trump’s decision last week to impose a 25 percent tariff on India, along with unspecified penalties for its purchases of Russian oil, has brought bilateral trade negotiations to a serious impasse. And since then, Trump has shown no sign of backing off: On Tuesday, he warned that he would further raise tariffs “very substantially.” Trump’s scattergun approach could result in the collapse of years of negotiations and undermine decades of bipartisan efforts to build a stronger U.S.-India relationship.
A U.S.-India trade deal has long enticed but eluded Trump. During his first term, Washington and New Delhi tried to reach what was called a “mini” trade deal but could not cross the finish line by January 2021. Back then, the mini-deal was considered a first step ahead of a broader “phase one” of negotiation over a bilateral trade agreement, and both sides still claim to want to reach that goal.
Since the start of his second term, Trump has repeatedly undermined bilateral trade negotiations by bringing in nontrade issues that are extremely sensitive to the Indian government. Again and again, the Trump administration has hit New Delhi with threats that strike at India’s core interests, including its relationship with Russia, its rivalries with Pakistan and China, and its sovereign right to participate in multilateral organizations.
All is not lost, however. The Trump administration can still repair the relationship between the world’s two largest democracies by turning back to familiar measures: working on trust-building measures ahead of a forthcoming Quadrilateral Security Dialogue leaders’ summit, a potential high-level meeting on the sidelines of the United Nations, cooperating on technology, and revisiting a mini-deal on trade.
New Delhi is willing to talk. The question is whether Trump wants to put in the time and effort that the relationship needs.
Let’s start with what’s gone wrong. In May, after a dangerous border flare-up between India and Pakistan, Trump claimed that he had used the threat of tariffs to get Prime Minister Narendra Modi to de-escalate. India has a long-stated policy of not allowing foreign interference in its disputes with Pakistan—a preference that is well-known in Washington. Embarrassed and infuriated, New Delhi refuted Trump’s claim by releasing an official readout of a phone call between the two leaders with a different version of events. Through a variety of channels, Indian officials made clear that they perceived Trump’s statement as putting India on par with Pakistan, as if decades of deepening U.S.-India bilateral cooperation were irrelevant.
Next, the Trump administration threatened to impose tariffs on the BRICS countries, which include Russia and China—but also India. Again, New Delhi was incensed at being targeted for policies unrelated to trade and viewed the warning as an infringement on its sovereignty and autonomy.
Last week, the Trump administration added the threat of so-called secondary tariffs to punish India for its admittedly considerable purchases of Russian oil. For the past three years, the Indian government has complied with the U.S.-led multilateral cap on the price of Russian oil, and the United States has sanctioned private Indian companies for various violations. Trump’s threat to penalize India for following rules agreed upon by the United States and other countries is unprecedented—and has infuriated New Delhi yet again.
Further inflaming the issue is the fact that the Trump administration seems to be treating India as an exception—it has not threatened China or even Turkey over their purchases of Russian oil, and in fact has just announced an extension of bilateral trade talks with Beijing.
Put together, Trump’s moves are puzzling for New Delhi and amount to serious blows—not just to the trade talks but also to the U.S.-India relationship that Trump himself came into office rightly seeking to prioritize.
Luckily, New Delhi’s official responses to date have been measured, leading to a small opening to get the relationship back on track. A broader approach that focuses on the relationship as a whole rather than fixating on tariffs is the best way to get to where the White House might want to go in the trade talks.
First, the United States would be wise to talk to India about the Quad, a grouping that also includes Australia and Japan. Doing so would demonstrate the Trump administration’s commitment to strategic cooperation in the Indo-Pacific, therefore boosting New Delhi’s confidence in Trump’s commitment to India. There is a pressing need to develop concrete deliverables for the upcoming Quad leaders’ summit, which will take place in New Delhi this fall.
Second, the White House should ensure a productive meeting between Trump and Modi on the margins of the United Nations General Assembly in September. This would go a long way to restoring trust between the two capitals.
Third, the White House needs to remember the commitment that it made to the broader economic relationship with India. A good way to do this would be to ensure concrete deliverables out of the TRUST (Transforming the Relationship Utilizing Strategic Technology) initiative—the Trump administration’s version of a U.S.-India technology partnership. Cooperation in artificial intelligence, biotech, semiconductor manufacturing, and other areas are all ripe for further development—as Trump promised he would in his February statement on the relationship.
Finally, U.S. and Indian negotiators should continue their talks that are already scheduled for late August. To get back on track, Washington and New Delhi should figure out what they can agree on, conclude the long awaited “mini-deal” as soon as possible, and rebuild trust to speed up phase one of a comprehensive bilateral trade agreement.
These moves should not be seen as a gift to New Delhi—in fact, they could provide the space needed to negotiate a creative deal that meets both sides’ core priorities. Trump left the door open to renegotiation by saying that in a few weeks’ time, the arrangements could change. This could be achieved by the time of his potential visit to New Delhi in the fall.
Previous Democratic and Republican administrations have built habits of trust between the United States and India. The two nations are fortunate to have high levels of political will in their respective capitals in support of the bilateral relationship and its strategic value. That enables a long-term perspective, which makes it likely that the two sides will ultimately reach some kind of an agreement.
Trump has the chance to get the relationship back on track—and meet his own strategic goals—by moving past the threats, remembering what’s been built so far, and broadening the discussion with a New Delhi that remains eager for a partnership.