Trump Pushing India Into High-Stakes, High-Risk China Clash

2025-04-24 12:01:47

(MENAFN- Asia Times) US President Donald Trump's tariff war has sent shockwaves across the global economy, but no leader has felt its sting more keenly than India's Prime Minister Narendra Modi. Caught in a high-stakes geopolitical bind, India is grappling with an existential dilemma: balancing its vital economic ties with China against the allure of the American market.

On April 2, 2025, the Trump administration slapped a 26%“reciprocal” tariff on Indian goods, forcing New Delhi into fraught negotiations to preserve access to the American market, its largest export destination.

Despite the Indian media's portrayal of Modi as a“Vishwaguru” (world leader) and indomitable strongman, India's response has betrayed a surprising deference, seen in fast and big import duty cuts on Harley-Davidson motorbikes and American-made bourbon whiskey amid a broad pledge to tear down trade barriers. New Delhi has also announced plans to buy more US energy and defense products in a bid to placate Trump.

Sensing the weakness, the Trump team has leveraged a 90-day reprieve on the tariffs to press India into a broader American strategy to isolate China economically and strategically. As part of this diplomatic offensive, US Vice President JD Vance arrived in Delhi on April 22 for a high-profile four-day visit.

Ostensibly a family affair-Vance, with his Indian-origin wife and children, framed the trip as a nod to his Sasural (“in-laws”) and his kids'“Nana-Nani” (maternal grandparents)-the visit's true purpose is to tighten the screws on India and secure its alignment against Beijing.

Where Trump dangled the carrot of American investment shifting from China to India in his first term, he brandishes the stick of tariffs to bend Modi to his will in his second.

Economic Affairs Secretary Ajay Seth said this week the“first order” hit from 26% tariffs on India, if imposed, could reduce GDP by between 0.2 and 0.5 percentage points, which he said was“not a huge impact.” Nonetheless, underscoring the urgency of the situation, New Delhi planned to dispatch both its chief trade negotiator and finance minister to Washington this week before the fateful Kashmir attacks.

India's predicament is rooted in its bifurcated economic reality. Its industrial base, often little more than an“assembly line,” relies heavily on Chinese intermediate goods, raw materials, capital equipment, technology and investment to produce final products for export, particularly to the US.

In 2024-25, China accounted for over 14% of India's total foreign trade, while India's imports contributed a mere 1.9 % to China's global trade, highlighting a stark asymmetry. The US currently accepts 35% value addition in India as sufficient for a“rules of origin” certificate, allowing India to import Chinese components, assemble them and export finished goods to America.

Yet this model leaves India vulnerable to a percentage readjustment. Tilting toward the US risks Chinese retaliation that could choke its production lines; leaning toward China threatens to forfeit US market access.

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