Can US afford trade war with India amid evolving geopolitics? 5 must-know geopolitical realities

The chequered history of antagonistic stances during the decades-long USA-Soviet Union Cold War and subsequent détente, which brought Capitol Hill and Raisina Hill closer, shaped by geopolitical power balances between the world’s oldest and youngest democratic countries, is a tell-tale sign of the complexity and dynamics of their relationship. A high-voltage trade war between the United States and India could have far-reaching consequences—not just economically, but also diplomatically and strategically. At a time when the US is already deeply entrenched in a tech and trade cold war with China, the feasibility of sustaining another trade conflict, particularly with a strategic partner like India, appears both impractical and unwise. Such a conflict could overshadow the efforts of former US presidents like George W. Bush, Bill Clinton, Barack Obama, and Joe Biden, who extended an olive branch to Delhi to work together on common concerns regarding growing Islamic extremism, energy security, and climate change.

The trade war between the United States and China, initiated under the Trump administration and continued with nuanced strategies by President Joe Biden, has disrupted global supply chains, increased tariffs, and led to decoupling in key sectors like semiconductors, AI, 5G, and pharmaceuticals. This rivalry is not just about economics but also technology supremacy, national security, and ideological competition between democratic and authoritarian models of governance.

The US is now actively working to "de-risk" from China, which includes encouraging Chian Plus One strategy, manufacturing relocations, forming trade partnerships with democratic nations, and controlling Chinese access to cutting-edge technologies. In this strategic calculus, India has emerged as a natural partner—not only because of its shared democratic values, but also due to its economic potential, strategic location, and growing technological prowess.

India, with a population of over 1.4 billion and a GDP nearing USD 4 trillion, is the world's fastest-growing major economy, placing it behind the United States with a GDP of USD 30.51 trillion, China at USD19.23 trillion, and Germany at USD 4.74 trillion. It is projected to become the third-largest economy by 2030. More importantly, it is a robust democracy, unlike China, and has a young, digitally enabled consumer base.

Over the years, successive Indian governments—whether led by the Congress or the Bharatiya Janata Party (BJP)—have nurtured deeper ties with the United States. From the civil nuclear deal during the Manmohan Singh-Bush era to the strengthening of QUAD and signing of key defense agreements under Prime Minister Narendra Modi and President Biden, bilateral ties have touched new heights. "Howdy Modi" and "Abki Baar, Trump Sarkar," the reverberations of which are still echoing around the world, have cemented India-US relations with an emotional bond between PM Modi and Trump.

The US now sees India as a central pillar of its Indo-Pacific strategy, aimed at counterbalancing Chinese influence in the region. From military cooperation and joint exercises like Malabar to investments in critical technologies and semiconductors, India’s positioning with the US has become more strategic than transactional.

Can the US Sustain Strained Ties with India?

Engaging in a trade war with India, especially in the current geopolitical climate, could be counterproductive for the United States. Here are five compelling reasons WHY:

1. India as a Consumer Powerhouse

India is one of the largest markets for American companies in sectors like technology, defense, agriculture, pharmaceuticals, and energy. US giants such as Apple, Amazon, Boeing, and Tesla see India as a critical growth destination. Restricting trade or imposing tariffs would directly impact US corporate interests.

Moreover, India’s increasing emphasis on local manufacturing (Make in India, PLI schemes) is creating opportunities for American investments in electronics, green energy, and EVs. Disrupting this potential through a trade war could push India toward alternative partners such as Russia or the EU.

2. A Reliable Democratic Ally in Asia

As the US seeks to strengthen global democracies and build resilient supply chains, India remains the only large, stable, and democratic counterweight to China in Asia. Its neutral stance in conflicts like the Russia-Ukraine war has also demonstrated India's commitment to strategic autonomy, a quality the US respects.

India’s G20 presidency and leadership role in the Global South further enhance its diplomatic influence. Isolating or antagonizing such a partner could weaken the US's broader goals of forming a rules-based global order.

3. Economic Interdependence

In the fiscal year 2024–25, India–US trade reached USD 131.8 billion, comprising USD 86.5 billion in exports from India and USD 45.3 billion in imports, making the US India’s largest trading partner. This shows a strong and robust strategic economic relationship between the two countries. Nearly 2,000 American companies operate in India, while Indian firms have invested over USD 40 billion in the US, creating around 425,000 jobs that is documented in a report titled "Indian Roots, American Soil”. This economic interdependence serves as a buffer against abrupt policy shifts or trade hostilities.

4. Geopolitical Timing Matters

With tensions in the South China Sea, the Taiwan Strait, and Ukraine-Russia conflict still unresolved, the US cannot afford to lose India as a regional ally. Unlike Cold War times, today’s conflicts are multipolar and multidimensional—ranging from cyberspace to climate diplomacy. India’s cooperation is crucial in areas like AI regulation, global data flows, cybersecurity, and space exploration.

5. India-US for Global Peace

India and the US, united, can ensure global peace, prosperity, and stability. India, once counted among the 'Fragile Five' nations, as coined by investment firm Morgan Stanley, today finds itself among the 'Fabulous Five' economies of the world. The strong base of the Indian diaspora in the US works with honesty and dedication, in line with the spirit of 'Vasudhaiva Kutumbakam' (The World is One Family). The India-America partnership operates on the principle of promoting global peace.

Pragmatism Over Provocation

Of course, India and the US have their share of trade disputes—ranging from tariffs on agricultural products and medical devices to data localization policies and digital taxation. But these should be addressed through dialogue and negotiation mechanisms such as the US-India Trade Policy Forum, rather than retaliatory measures. Both nations are members of the Indo-Pacific Economic Framework (IPEF) and have begun collaborating on semiconductor supply chains, critical minerals, and AI governance. These positive developments must be leveraged to create a roadmap for sustainable, balanced trade rather than indulging in protectionist impulses.

In an era where alliances are being redrawn and global order is in flux, the US must tread carefully. Engaging in a trade war with India would not only harm American business interests but also erode the foundation of a strategic partnership that is essential to its Indo-Pacific vision. India, with its demographic dividend, economic momentum, and democratic stability, is not just another trade partner—it is a strategic necessity for the United States. It worth mentioned the famous quote of former US president Barack Obama, “India is not simply an emerging power; it is already a world power, and a natural partner of the United States.” So, instead of trade conflict, collaboration should guide the next phase of India-US relations, Donald Trump must rethink.