Wounded Pride

The Indian government claims that India’s global diplomacy under Narendra Modi has made the country a leader on the international stage. For Modi’s supporters, these alleged triumphs offered relief amid palpable discontent on the home front as a result of increasing taxation, stagnant incomes, and rising household indebtedness. Skewed and unequal economic growth has largely benefited India’s rich and the urban population, while the middle and working classes suffered excruciating losses during the COVID-19 pandemic.

The picture of India’s emergence as a strong global actor with a growing economy served as compensation for these shortcomings. Yet even this bubble has now burst as the Trump administration rolls out its erratic policies.

The first blow came in May 2025 when Donald Trump declared that India and Pakistan had agreed to a “full and immediate ceasefire” in US-brokered talks before there was any official announcement by the Indian government. This unilateral announcement dented the image of Modi’s government as a strong and sovereign international player. Opposition parties also criticized Modi for allowing “third-party mediation” in a matter concerning bilateral issues between India and Pakistan and demanded more transparency from the government.

In response, the Modi government denied the US role in reaching a ceasefire agreement with Pakistan. Yet the Pakistani government contradicted this denial, repeatedly lauding Trump and even nominating him for the Nobel Peace Prize. The nomination cited his “decisive diplomatic intervention” in de-escalating the conflict.

Economic Warfare

Some observers have suggested that Modi’s unenthusiastic attitude has offended Trump, who later decided to impose a 50 percent tariff on Indian goods, citing India’s continued purchase of Russian oil as justification. The United States has repeatedly argued that India has financed Russia in its war against Ukraine through such purchases.

The 50 percent tariff on US imports from India — double the initial rate — once again prompted the Indian opposition to challenge the subdued response of Modi and his government.  In September, Trump appeared to put a freeze on hostility by making a birthday call to Modi, a gesture that Modi warmly reciprocated. Both leaders expressed their interest in renewing the “India-US Comprehensive and Global Strategic Partnership.”

The United States is India’s largest trading partner, and also one of the few countries with which it had a trade surplus in the latest figures. The United States accounts for around 18 percent of India’s total exports of goods. In 2024, the total trade in goods and services between India and the United States was estimated at $212.3 billion — an increase of 8.3 percent from the previous year.

The United States exported goods and services worth $41.5 billion and $41.8 billion, respectively, to India in 2024, while importing $87.3 billion of goods and $41.6 billion of services. India’s exports to the United States include electronic goods, gems and jewelry, pharmaceutical products, and light crude oil.

Just a few days after his birthday wish to Modi, the Trump administration announced a fiftyfold hike in the cost of the H-1B visa, raising the charge to $100,000. Indians constitute more than 70 percent of the beneficiaries of the H-1B program, which grants work visas to skilled workers. The second-largest group of recipients were the Chinese, with 12 percent. The abrupt decision resulted in chaos as most of the program’s Indian beneficiaries anticipated a disproportionate financial burden.

Again, the Trump administration’s objective was to send a message to India. And again, the response from the Indian side was muted. India’s commerce minister, Piyush Goyal, confined himself to a self-congratulatory remark: “They are also a little afraid of our talent. We have no objection to that.” For his part, Modi insisted that the only real enemy India had was “dependence on other countries.”

Many analysts have argued that the United States stands to lose more from the new visa regime than India. The resulting shortage of specialized and skilled workers, even for a few years, could severely hamper its innovation, competitiveness, and economic health. How well the Indian landscape is prepared to host its returning talent remains unclear.

The Trump Effect

The events of the past few months have prompted commentators in India and elsewhere to question Modi’s diplomatic strategies. His domestic opponents argue that India’s weak leadership has compromised its interests. The US tariffs have already started to effect the informal economy and India’s working population.

From April to June, employment in the informal manufacturing sector fell by 9.3 percent. The Trump tariffs have significantly affected the leather and tanning industry, with more than fifty leather factories shutting down out of three hundred in the Ambur-Ranipet belt, the industry’s heartland. The tariffs are also likely to have a severe impact on a range of export-oriented and labor-intensive sectors, including electrical equipment, textiles, auto components, and agriculture. Experts estimate that between 200,000 and 300,000 jobs are at immediate risk.

Many countries have challenged the policy of intimidation that the Trump administration has unleashed. In contrast with Modi’s nonconfrontational posture, the Chinese ambassador to India, Xu Feihong, described the United States as a “bully” and expressed Beijing’s firm opposition to the tariffs on India. India’s subdued response to Trump reveals a confused and insecure position.

India’s stance toward China reflects a similar attitude of volatility and confusion. The economic relationship between India and China has evolved in the shadow of the geopolitical tensions and border disputes between the two countries since they went to war in 1962. In recent years, China has emerged as India’s largest trading partner for goods. India’s biggest trade deficit is with China, and that deficit has been growing year after year, reaching nearly $100 billion in 2024–25.

In May–June 2020, there was a stand-off between Indian and Chinese troops along the Line of Actual Control (LAC), the disputed boundary between the two countries. In the wake of this conflict, there was a huge wave of anti-China sentiment in India, with calls for a boycott of Chinese goods and services and a ban on multiple Chinese apps, including TikTok, WeChat, and Baidu.

The Modi government jumped on this populist bandwagon by pledging to block investment and increase tariffs for Chinese goods. Despite these measures, however, India’s bilateral trade with China actually increased from $65.2 billion in 2020–21 to $113.5 billion in 2024–25.

Change of Line

The Trump tariffs have now prompted India to revise its confrontational attitude toward China. After a few months of Trump blowing hot and cold, Indian government officials began warming up to China in August and September of this year.

This new closeness suddenly manifested itself in India’s tame, pro-government media, with broadcasts of China’s Victory Day Parade even as Modi opted to skip the Chinese military extravaganza. India has also been weighing the relaxation of investment rules for China in particular sectors such as manufacturing and renewable energy.

The discourse of India’s foreign policy experts echoes this fickle policy toward China. Long-term advocates for close cooperation with the United States are now arguing that India must “reform and reset” its relations with Washington.

Pro-government commentators have still been trying to protect the image of an emerging “Asian giant.” Ram Madhav, former general secretary of Modi’s Bharatiya Janata Party, warned that China “should not make the mistake of assuming that India has become vulnerable after the US sanctions” or see ties between the two states as a “sovereign–vassal relationship.”

This demand for recognition of India’s sovereignty and economic might seems much less convincing at a time when the Trump administration has run roughshod over India’s foreign policy orientation. As China presses ahead with its attempt to reshape the world order, India continues to flounder.