The entire story, which saw India-US relations hit rock bottom, underscored how Prime Minister Modi, without any confrontation or provocation, let patience do the hard work. Ultimately, America’s loudest dealmaker blinked — without Prime Minister Modi having to say a word or resort to massaging Trump’s ego. Crucially, Prime Minister Modi chose not to play on Trump’s terms. Ask US Commerce Secretary Howard Lutnick and he’ll tell you how India “missed” a window for a trade deal just because Prime Minister Modi didn’t personally call Trump last year.
However, the details of the deal remain unclear, with differing accounts from Trump and Modi. Prime Minister Modi made no mention of reaching a trade deal, nor of claims about halting Russian oil purchases or the $500 billion commitment to buy American products that Trump criticized in his post. In perspective, US merchandise exports to India in 2024 were only $41.5 billion. Scaling up to $500 billion will take years, if not decades.
However, it is clear that an 18% tariff will make Indian goods such as textiles, gemstones and leather more competitive again.
While it will become clear who has benefited most from the trade deal once the finer details are revealed, the tariff cut undoubtedly marks a diplomatic victory for Prime Minister Modi after months of continued public criticism from Trump and his aides.
WHY DID TRUMP LOWER INDIA RATES?
So, what was the trigger? Let’s make it clear. India today has an economy that is too large and dynamic to be easily intimidated by Trump’s tariff and trade threats. Despite being labeled a ‘dead economy’ by Trump, three major countries and the European Union (EU) rushed to sign trade deals with India. It created a positive image and strengthened India’s image as a reliable and stable partner compared to the hostile US.
Last year, Britain, New Zealand and Oman struck trade deals with India amid trade volatility devastated by Trump. The icing on the cake was undoubtedly the ‘mother of all deals’ between India and the EU signed last month. Analysts even pointed out that this likely put pressure on Trump, making him blink first in the trade battle with India.
The wave of trade deals gave India the cushion to dig in its heels and strengthened its bargaining position in the trade negotiations with the US. India became the go-to partner for countries rejected by Trump. It gave India the confidence to stick to its red lines by not allowing wider access to its dairy and agricultural sectors.
However, despite being firm, Prime Minister Modi handled the issue of tariffs maturely and pragmatically. Neither Modi nor senior ministers like S. Jaishankar joined the war of words with Trump since the 50% tariffs came into effect.
HOW INDIA AVOID THE TRUMP TRAP?
India proved the American president right very early on. Trump thrives on provocation, spectacle and likes to dictate the script. Prime Minister Modi avoided the theater of confrontation and drama that Trump uses to maintain his MAGA persona.
Prime Minister Modi avoided as many as four calls from Trump after the tense June 17 conversation in which he emphatically denied his role in the India-Pakistan ceasefire and refused to weigh in on his Nobel Peace Prize ambitions. It gave Trump a bruised ego and a 50% tariff was imposed.
This was supported by a report from Jefferies, an American financial services company, which said Trump’s “personal grudge” was behind the high tariff for India.
On the other hand, Pakistan’s willingness to give Trump the credit he sought helped the country mend ties with Washington. At the center of this reset was Pakistan’s army chief, Field Marshal Asim Munir, who built a relationship with Trump based on minerals, crypto deals and strategic influence.
While Trump talked tough and the prospects with Pakistan rose, Prime Minister Modi stuck to the long game. India continued talks with the US and did not sever ties.
THE OPTICS OF CHINA, RUSSIA
However, India showed no sign of turmoil, diversifying its trade and making more public overtures to China and Russia. Prime Minister Modi visited China last year for the first time in seven years to attend the Shanghai Cooperation Organization (SCO) and met Xi Jinping and Russian President Vladimir Putin.
Images of Prime Minister Modi, Xi and Putin laughing and displaying new camaraderie upset Trump. “It appears we have lost India and Russia to the deepest, darkest China,” Trump wrote in a post like a jilted lover. Again: minimum words, maximum impact.
Two months later, in December, Prime Minister Modi hosted Putin for a grand state visit, and the two sides announced a slew of agreements. The overtures carried a lot of symbolism and signaling. India’s strategy of hedging itself by involving all major powers paid off.
It is not that India has not retaliated. Besides reducing its exposure to the US dollar in trade, India also quietly imposed a 30% tariff on US pulses. Here, silence did not indicate the absence of action, but rather the avoidance of distraction. A chest-thumping announcement could have irked Trump and prolonged the battle over tariffs.
Despite Trump’s noise, Prime Minister Modi responded with tact and poise. It seems to have been the strongest noise of all as rates fell from 50% to 18%.
– Ends
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