Trump Advisers were sometimes fed up with New Delhi’s tough stance
By T N Ashok
NEW YORK: When Donald Trump and Narendra Modi announced their trade agreement on February 2nd, the American president called it evidence of an “amazing relationship.” The Indian prime minister thanked his “dear friend” with characteristic diplomatic warmth. Yet beneath this bonhomie lies a more complex story—one of coercion and calculation, of tactical retreats and strategic victories, and of how India is learning to navigate an increasingly transactional world order.
The deal itself is modest: America will cut tariffs on Indian goods from 25% to 18%, effective immediately. There is no comprehensive treaty text, no services liberalisation, no opening of India’s protected agricultural sector. What the White House celebrates as a breakthrough is, in reality, damage control—a ceasefire in a trade war that neither side could afford to fight, but which Mr Trump seemed determined to start.
To understand why this matters, one must look back at how dangerously close both countries came to mutual economic harm. Mr Trump’s trade doctrine rests on a simple, blunt instrument: reciprocal tariffs. If you charge us, we charge you—only harder. India’s average tariff on American goods hovers around 17%, compared with America’s 3-4% on Indian imports. This asymmetry became, in Mr Trump’s mercantilist worldview, an intolerable affront.
By mid-2025, the threat was real and imminent. The administration warned it would impose tariffs of up to 50% on Indian exports unless “reciprocal corrections” were made. A 90-day pause was granted to keep negotiations alive, but the sword remained suspended. For India’s export-dependent manufacturing sector—particularly textiles, leather, and gems—the stakes were existential. The American market accounts for over $130 billion in bilateral trade and represents India’s largest merchandise trading partner.
Yet India refused to capitulate entirely. Sensitive sectors, especially agriculture and dairy, remained shielded from American demands. The Modi government calculated, correctly, that it could not politically survive opening Indian farms to subsidise American produce. But it could not ignore the tariff gun either. The result was this narrow compromise: meaningful relief for exporters, minimal political cost at home, and enough face-saving for both leaders to declare victory.
What changed the calculus, however, was not just American pressure but European opportunity. Just days before the US announcement, on January 27th, India and the European Union concluded what both sides are calling a landmark free-trade agreement—the product of nearly two decades of negotiation. The timing was not coincidental. It was strategic.
The India-EU FTA is everything the Indo-US deal is not. It is comprehensive, covering 90-96% of traded goods, with deep provisions on services, investment protection, digital trade, and dispute resolution. The EU is India’s largest export market by value, with two-way trade exceeding $136 billion. More importantly, it offers what American trade policy under Mr Trump never could: legal certainty, institutional depth, and immunity from the whims of domestic politics.
By securing Europe first, India fundamentally altered its leverage with America. It signalled to Washington that it had options—that the days of India being isolated and vulnerable to unilateral pressure were over. A former Indian trade negotiator captured the logic bluntly: “Trump doesn’t do multilateral elegance. He does pressure. India chose containment over confrontation.” But only after ensuring it had somewhere else to go.
The contrast between the two deals is instructive. The EU agreement is architecture; the US deal is firefighting. One is designed to outlast political cycles and reshape supply chains; the other provides immediate relief but remains vulnerable to the next American election. As one institutional investor noted, “If you’re building factories, the EU deal matters more. If you’re shipping containers next quarter, the US deal does.”
Yet dismissing the American agreement as insignificant would be mistaken. In the short term, it delivers tangible benefits to Indian exporters whose margins were being squeezed by tariff uncertainty. Stock prices in export-heavy sectors surged on the news. More subtly, it demonstrates India’s growing ability to balance competing pressures without sacrificing core interests. Modi did not open agriculture, did not surrender tariff sovereignty entirely, and did not allow the relationship to collapse.
That is not capitulation; it is statecraft. Modi style – India trade and foreign ministry style.
The domestic political reaction in India reflects this ambiguity. Government supporters portray Modi as having secured the “best possible deal” while protecting farmers and small businesses. Opposition leader Rahul Gandhi accused the administration of yielding to “economic blackmail” and demanded parliamentary scrutiny. Regional leaders questioned whether concessions on tariffs were traded for silence on India’s continued purchases of discounted Russian oil—a charge both governments deny, but which shaped the negotiations nonetheless.
The Russian dimension is crucial to understanding the geopolitical subtext. India’s refusal to join Western sanctions against Russia, and its decision to dramatically increase oil imports from Moscow, has been a persistent irritant in Washington. The White House reportedly dropped at least some punitive tariffs linked to these purchases as part of the broader deal. For India, this represents a small but significant victory: maintaining strategic autonomy on Russia while limiting economic cost.
Yet the unspoken actor in all of this is China. Beijing appears nowhere in the treaty texts but is present in every calculation. For America, strengthening ties with India—even through limited deals—is part of a broader strategy to counterbalance Chinese influence across Asia.
For India, diversifying trade with both Europe and America reduces dependence on Chinese supply chains and enhances its position as an alternative manufacturing hub. For Europe, India represents a hedge against both Chinese dominance and American unpredictability.
A Singapore-based strategist summarised the triangular logic neatly: “China doesn’t appear in the text, but it’s present in every calculation.” India’s ability to position itself as indispensable to Western strategies of “China-plus-one” manufacturing gives it leverage that would have been unthinkable a decade ago.
Do the two agreements—American and European—conflict with each other? Not directly. They reveal instead a hierarchy of priorities. The EU FTA is India’s long game: stability, scale, diversification, and rules-based certainty. The US deal is India’s short game: risk containment, export protection, and tactical flexibility. They coexist, but they are not equals.
Whether the Indo-US arrangement evolves into something deeper will depend on negotiations over market access, services, and digital rules—negotiations that may again become geopolitically charged.
What looks like a sudden breakthrough is, in reality, a carefully staged compromise. India did not surrender sovereignty, but it acknowledged the cost of defiance in a tariff-driven world.
And by signing a sweeping deal with Europe just days earlier, New Delhi quietly sent Washington a message of its own: India now has options. In the emerging global order of fragmented trade blocs and competitive nationalism, that may be the most valuable commodity of all. (IPA Service)
