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Shortly after Trump's election victory last November, a large majority of Indians believed that his upcoming presidency would be good for their country. This was certainly helped by the fact that India's Prime Minister Modi, out of a kindred spirit between autocrats, had promised his country special privileges. Five months later, the world knows more about what to expect from the Trump administration. India too. Under Trump's recently announced tariff regime for imports into the US, India will be subject to a 26 percent tariff. This is better than China, for example (where tariffs have risen to 145 percent in a senseless escalation), but worse than Germany. As an EU country, Germany will be subject to a 20 percent tariff. Switzerland, a non-EU country, will be subject to a tariff of 31 percent.

In a direct comparison between India and the strong European export nations, both EU members and non-EU members, the fact that India levies higher import duties overall than the Europeans is irrelevant. Furthermore, when setting the tariff on imports from the most successful European exporting nations, it is completely ignored that EU exporters such as Germany and the Netherlands, as well as non-EU countries such as the UK and Switzerland, are among the most important investors in the US and thus offer high-quality jobs, thereby fulfilling precisely the conditions that Trump has declared to be the basis of his economic policy: invest and produce in the US. In theory, this would be an advantageous negotiating position for Europeans if the tariff were still negotiable.

India would not have this advantage. On the contrary, Modi's economic policy, in line with Trump's vision, also aspires to foreign investment and commitments to expand India's industrial base. In this respect, the US and India are therefore competitors on the global financial market. The tariff is likely to have come as a negative surprise to Modi.

India faces further disappointment on the immigration issue. The first forced repatriations of Indians without residence permits have taken place. In addition, Trump's administration is considering revoking entry and residence permits for skilled workers (the so-called H-1b visas), almost three-quarters of which went to Indian IT specialists in 2022-2023. The only opposition to the internal majority lobby “Americans first” in Washington at the moment is tech entrepreneur Musk, who is known to be heavily dependent on IT specialists for his various industrial projects and finds most of them in India. He has also spoken out against Trump's “tariff madness.”

Finally, a deterioration in relations is also to be expected in defense cooperation for Modi. Biden's policy is to be reduced or ended. This consisted of having American defense equipment produced in India, ultimately also to gradually wean India off its former Soviet/Russian defense cooperation. Such geostrategic considerations are obviously not a factor for Trump. Trump wants Modi to buy military goods directly from American manufacturers. As the world now knows, “America first” is directed against both enemies and allies and other friends. The basic idea that increased arms cooperation in line with Trump's predecessor Joe Biden would strengthen America's containment strategy against China in the Indo-Pacific is politically irrelevant to Trump.

The example of India, one of America's most important strategic partners globally, demonstrates how difficult it has become to imagine the US as the leading power of the Western world and the guarantor of the Western-shaped world order in the future. Initial reactions already indicate the direction in which global developments are heading. A voice from the UK (former UK Treasury Minister Jim O'Neill) suggests that, in the wake of the expected new intergovernmental groupings in world trade, the members of the G7 (without the US) should play a leading role. For its part, China has also reached out to both the EU and India to initiate a discussion on coordinated tariff reductions among themselves. The objective would therefore be to reorganize the countries and regions that are inclined toward free trade without the US. The general rules of the World Trade Organization (WTO) would provide an obvious “natural” framework for such agreements.

The irony, however, is that the WTO was founded by the US and China was only accepted as a member in 2001 with reservations. India would be motivated to adapt to changed geostrategic conditions to anchor its desire for economic growth in new political circumstances. A first step in this direction could be the dialogue sought by the EU on an EU-India free trade agreement. Such an agreement has recently been concluded with the EFTA (European Free Trade Association), which, as is well known, includes Switzerland and Norway. The next deadline in this “tariff calendar” is the expiry of the 90 days Trump has given the affected trading nations to prevent the definitive entry into force of the tariff regime announced on April 2 through “negotiations.” Even with the best will on both sides, an improvement in India's export conditions to the EU through a free trade agreement cannot be achieved so quickly. Prime Minister Modi will, therefore, realize that his own country, just as any other country of the world, whether ally, partner or adversary, will continue to be subjected to Trump’s governance style and arbitrariness.

1st May 2025 / Philippe Welti
 

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