Brief Summary
The discussion centres on the increasingly strained relationship between the US and India, highlighting the geopolitical and political factors contributing to the tension. It examines the impact of President Trump's policies and rhetoric on India, the potential for a trade war, and the broader implications for US businesses and regional economic dynamics. The conversation also touches on the historical context of US-India relations, India's relationship with Russia, and the challenges of navigating President Trump's unpredictable approach to foreign policy.
- The US-India relationship, once bipartisan, is becoming increasingly politicised.
- President Trump's policies and statements are creating distrust and pushing India into a corner.
- India views some US actions as hypocritical, particularly regarding trade with Russia.
- American companies are worried about being caught in the crosshairs of a potential trade war.
- India's economic integration in Asia is lagging behind due to protectionist policies.
US-India Ties and Politicisation
The US-India relationship has become highly politicised, with President Trump's actions and statements creating challenges. Despite generally positive geopolitics, the domestic politics in both countries are proving troublesome. Trump's tariff threats, including those related to India's Russian oil purchases and BRICS membership, are perceived as unrelated to trade. This has led to the Indian media, public, and opposition pressuring the government to resist any perceived weakness. Even if a tariff deal is reached, the trust has eroded, pushing the relationship into the centre of domestic politics in a way that could be detrimental.
Shifting US Policy and Strategic Understandings
The shifts in US policy under President Trump are surprising to India, differing from the bipartisan trajectory seen even in his first term. Historically, disagreements over third-party relationships (e.g., India's ties with Russia and Iran, and the US's with China and Pakistan) were managed without significantly impacting the bilateral relationship. However, the US is now threatening sanctions on India due to its relationship with Russia, which India views as hypocritical given continued Western trade with Russia. India is also troubled by the US's outreach to China. These factors are causing strategic understandings that once underpinned the relationship to erode, leading to geopolitical surprises.
India's Perspective and Trump's Unpredictability
India has a long-standing relationship with Russia, and it is unrealistic to expect them to abandon it quickly. The US's public approach has backed Prime Minister Modi into a domestic corner, making it harder for India to reduce its oil purchases from Russia. President Trump's approach lacks consistency, as he has tariffed countries with both trade deficits and surpluses with the US, as well as those with and without free trade agreements. He also uses tariffs for non-trade-related issues like oil purchases and foreign policy, making it difficult for India to understand and navigate the situation.
Potential Backlash and Implications for US Businesses
Prime Minister Modi's appeal to Indian traders to embrace "swadeshi" (self-reliance) principles is surprising given his past pro-business stance. This raises concerns about a potential backlash in India against the US, which could affect US businesses across various sectors. American companies worry about being caught in the crosshairs of a trade war, with sectors and contracts potentially being politicised. The inherent contradiction between President Trump's "America First" and Prime Minister Modi's "Make in India" policies further complicates the situation, creating challenges for companies trying to navigate these competing priorities.
Frustration and Economic Nationalism
India is seen as a "whipping boy" due to the collective West's failure to resolve the situation with Russia, as stronger actions against China are difficult due to China's control over rare earth elements. India views the US's criticism of its oil purchases from Russia as hypocritical, given that other countries continue to trade with Russia in various commodities. President Trump's unpredictable behaviour adds to the challenge. While the Trump administration has frustrations with India's trade barriers and lack of structural reforms, India is also disappointed by the growing American "technationalism." This has led to widespread frustration among major US trading partners.
Regional Economic Integration and India's Position
South Asia is one of the least economically integrated regions globally. India has struggled to capitalise on supply chain shifts and investment flows into other competitive Asian economies due to a lack of integration through trade pacts and industrial connections. India's withdrawal from the Regional Comprehensive Economic Partnership (RCEP), fearing it would be a free trade agreement that would allow Chinese dumping, has left it outside a tariff wall that East Asian economies are inside. This has made it harder for India to compete with other rising Asian economies, although its large domestic market provides some advantages.
