India-US Relations: Continuity, Change, and Challenges in Trump's Second Term

India-US Relations: Continuity, Change, and Challenges in Trump's Second Term

By Harikrishnan S.

 As Donald Trump prepares to take office for his second term on January 20th, the trajectory of India-U.S. relations stands at a crossroads of continuity and transformation. Prime Minister Narendra Modi has framed this bilateral relationship through the lens of friendship and strategic partnership, fostering a sense of optimism within India. Yet, beneath this positive rhetoric lies a multifaceted interplay of economic, security, and geopolitical interests that shape the true nature of these ties.

Trade

Trump’s first term was characterized by significant trade tensions, driven by the administration’s focus on reducing trade deficits and demanding greater reciprocity in trade relations. India found itself at the receiving end of U.S. tariffs on steel and aluminium and was stripped of its preferential trade benefits under the Generalized System of Preferences (GSP). And, in all likelihood, as Trump embarks on his second term, a similar transactional approach to trade is likely to continue. However, there could be room for a strategic recalibration. India may respond by lowering certain tariffs to attract more investment from the United States, particularly in the manufacturing sector, as it ostensibly seeks to position itself as a viable alternative to China in global supply chains. Nevertheless, persistent disagreements over tariffs and market access could remain quite a stumbling block and could potentially hamper efforts at expanding bilateral trade. Finding a balance between protecting domestic industries and fostering a more cooperative trade partnership with the United States, therefore, will be challenging.

Investment

Both countries recognize the mutual benefits of increased investment, and with Trump clearly prioritising job creation within the U.S., his administration may encourage American companies to expand their operations in India, to leverage its cost-effective labour market and growing consumer base. Indian businesses seeking to invest in the United States could potentially benefit from reduced regulatory barriers, fostering a more favourable environment for cross-border investment. This two-way flow of investments would have the potential to strengthen economic ties between the two nations, creating jobs, boosting trade, and enhancing shared prosperity. Addressing structural challenges and streamlining policies could ensure that both countries can capitalize on these opportunities and thereby deepen their economic partnership.

 

Defence

In Trump’s first term, we did see India and the United States make notable progress in defence cooperation, highlighted by the signing of key agreements like the Communications Compatibility and Security Agreement (COMCASA), which significantly improved military interoperability between the two nations. India’s growing strategic importance in the Indo-Pacific region, particularly as a potential counterbalance to China’s expanding influence, is likely to sustain and even strengthen this momentum. As both nations share common security interests in maintaining a free and open Indo-Pacific, further collaboration in defence technology, joint military exercises, and intelligence sharing could become the feature of their partnership under Trump’s second term. A continued focus on defence ties would underscore the pivotal role of security in shaping a broader India-U.S. relationship.

Counter-terrorism

Shared concerns about terrorism, especially from South Asia, will remain the mainstay of India-U.S. cooperation. Trump’s idea of “peace through strength,” which emphasizes a firm stance on security threats, aligns closely with India’s objectives of combating terrorism, especially in pressuring Pakistan into taking concrete action against terror networks operating from within its borders. This convergence of priorities creates a strong foundation for further collaborative efforts, including intelligence sharing, counter-terrorism strategies, and coordinated diplomatic pressure on nations harbouring terrorist groups. Working together to address these threats would bolster regional stability and enhance mutual security interests for both countries.

Quad and Regional Stability

The Quadrilateral Security Dialogue (Quad), comprising the U.S., India, Japan, and Australia, experienced a significant revival during Trump’s first term, engendering a renewed focus on regional security and strategic cooperation. The Quad did emerge as a cornerstone of efforts to counterbalance China’s growing influence in the Indo-Pacific region. And, under a second Trump administration, it is expected to maintain its strategic importance, with a continued emphasis on advancing a robust Indo-Pacific strategy.

This could involve deeper collaboration on defence, maritime security, and infrastructure development to promote a free, open, and rules-based order in the region. The Quad’s role in addressing shared challenges such as supply chain resilience, cybersecurity, and regional stability would also likely expand, and solidify its position as a critical element of the United States’ foreign policy in Asia.

H1B Visas

Trump’s first term saw his administration’s restrictive policies on H-1B visas that posed challenges for Indian IT professionals, who constitute a significant portion of these visa holders. These measures, aimed at prioritising American workers, did create tensions in India-U.S. relations, given the vital role of Indian talent in the U.S. technology sector. A further tightening of H-1B policies during this second term could exacerbate these strains. However, the broader economic partnership between the two nations, particularly in areas like manufacturing, defence, and investments, might help offset the friction caused by visa restrictions. Striking a balance between domestic priorities and the mutual benefits of skilled workforce mobility would be key to ensuring that this issue does not snowball into overshadowing the overall strategic relationship.

 

The Indian-American community is a growing and politically influential group in the United States, and it could play a pivotal role in shaping policies that strengthen ties between the two nations. Trump’s evident rapport with Prime Minister Modi, demonstrated through events like “Howdy Modi” and “Namaste Trump,” may further contribute to fostering favourable policies, particularly in areas like trade and immigration. While contentious issues like H-1B visa restrictions remain, the advocacy of the Indian-American community could influence a more balanced and mutually beneficial approach, enhancing cooperation across sectors.

Geopolitical and Strategic Significance

India’s role in international forums like the G20 could gain greater prominence with strong backing from the United States, especially if Trump’s administration continues its efforts to counter China’s growing global influence. With U.S. support, India could advocate for reforms in global institutions, push for equitable economic policies, and strengthen its leadership on issues like climate change, digital economy, and sustainable development.

India's strategic location and its own border tensions with China position it as a vital ally for the U.S. in maintaining a balance of power in Asia. A second Trump administration would likely seek to deepen this partnership, leveraging India’s role to strategically counter China’s influence in the region. However, India’s participation in BRICS (Brazil, Russia, India, China, and South Africa) adds a layer of complexity to its relationship with the U.S. Within BRICS, India shares a platform with China and Russia, two nations often at odds with American interests. While BRICS primarily aims to challenge Western dominance in global affairs, India has been careful to distance itself from any overtly anti-U.S. sentiment that occasionally emerges from within the group. India’s cautious stance on BRICS expansion and its resistance to China-led initiatives like a BRICS currency reflects this nuanced approach.  While BRICS provides India with economic benefits, and opportunities for trade, investment, and cooperation that complement its broader foreign policy goals, moves within BRICS that challenge U.S. dominance, such as efforts toward de-dollarization led by China, could raise strategic concerns in Washington. The Indian approach aligns with its goal of maintaining strategic autonomy, avoiding rigid alignment with any bloc. However, this difficult balancing act can occasionally create friction with the U.S., especially on issues like the Ukraine conflict or global governance reforms. Balancing these dynamics will be critical for India as it seeks to sustain its relationships with both the U.S. and its BRICS partners.

Despite all these challenges, the India-U.S. relationship does look likely to remain pragmatic and interest-driven. Both nations recognize the value of cooperation in areas such as defence, technology, and regional stability, while, at the same time, working to address tensions arising from differing economic and geopolitical priorities. As India seeks to maintain its strategic autonomy and the U.S. focuses on countering China, their partnership will continue to evolve, marked by collaboration in key areas and careful navigation of inherent complexities.