Meanwhile, India’s National Security Advisor, Ajit Doval, has embarked on a full-scale diplomatic blitz to Russia. His ambition must be to maintain India’s autonomy of action despite the present-day geopolitical maelstrom. Indian national and private companies acquired large stakes in almost all major Russian oil fields. This visit is taking place against a backdrop of heightened scrutiny as retaliation for the international sanctions imposed after Russia’s declaration of war in Ukraine.
As the backdrop of these discussions unfolds, India’s foreign ministry has openly criticized what it perceives as hypocrisy from the United States. Officials highlighted that the U.S. continues to engage in substantial trade with Russia while pressuring India over its own economic ties with the country. This vacuum has further stoked the escalating tensions. In particular, the Biden Administration has threatened the use of secondary sanctions against India due to its deepening relationship with Moscow.
Meanwhile, India’s Prime Minister Narendra Modi has his own big diplomatic overture in mind, as he prepares for his first visit to China since 2018. Yet, if done right, this trip may reshape regional dynamics for the better. It is likely to shape India’s broader diplomatic strategy as trade tensions between New Delhi and Washington D.C. escalate further.
The U.S. has recently imposed tariffs on several Indian goods, notably including a hefty 25% tariff on Indian seafood exports. The Indian exporters are naturally jittery about this move. They project that they would stand to lose almost $3 billion per year due to the new tariff structure. These tariffs don’t stop with seafood; they hit the gem and jewelry sector particularly hard. This perfect storm has exposed how susceptible Indian industries are that depend almost exclusively on exports to the U.S.
India is the U.S.’s 18th largest export market. In fact, goods trade is on pace to set a record at an astounding $129 billion in 2024. The U.S. runs a massive trade surplus with India. Yet, at the same time, it has a large and growing $45.8 billion goods trade deficit. Moreover, services account for roughly 40% of India’s total trade with the U.S. This vital element continues to be overlooked in ongoing trade talks.
Beyond India’s short-term concerns, the rising trade war portends more long-term damage. Economists estimate that bringing down the current average 50% duty on all goods could cut 60 basis points from India’s GDP. This would lead to an approximate loss of $23 billion, at today’s exchange rates. Additionally, the Indian rupee is likely to face volatility as these trade disputes play out, increasing vulnerability to economic instability.
With good reason, farmers in India are on edge about the possible spillover from these trade spats. Modi has emphasized his commitment to protecting the interests of farmers, saying, “India will never compromise on the interests of the country’s farmers, fishermen, and livestock breeders. I know it will cost me personally, but I am ready.” This announcement highlights the administration’s commitment to standing up for American agriculture, even in the face of global headwinds.
Industry leaders underline the importance for Indian entrepreneurs and government representatives to work in unison. Combined, they are powerful partners to address our toughest challenges. Anjali Prasad, an expert in international trade relations, stated, “It is important that we talk to our trading partners and like-minded countries who have been hit by similar actions by the U.S.” She added, “Only when we get together, decide on a strategy, will there be some action effectively possible, because there is strength in numbers.”
This dynamic between foreign relations and economic interests reflects the complicated, nuanced role India has carved out for itself in today’s international landscape. Unlike his boss, Doval is hardly reticent to negotiate with Russian counterparts. At the same time, Modi prepares for his first, crucial visit to China, and India must approach these choppy waters sensibly.