The changing shades of U.S.-India ties

In February, U.S. President Donald Trump and Indian Prime Minister Narendra Modi exchanged warm greetings and bear hugs, and pledged to pursue an early trade agreement.

Now, six months on, that goodwill has soured. Trump labels India the “tariff king,” threatens higher levies within 24 hours, and accuses it of fueling Russia’s war in Ukraine through oil purchases.

That shift raises questions: Will India yield to U.S. pressure, or push back and risk straining a two-decade partnership?

Former Singapore diplomat Bilahari Kausikan told CNBC that India will always prioritize its national interests. “India is [a] country with a deep sense of self as an independent actor,” he said, adding it will “never play deputy to any sheriff.”

On Wednesday, Trump vowed to “substantially” raise tariffs on Indian exports, following a 25% hike and threats of penalties over Russian oil and arms purchases.

That marks a stark reversal from earlier optimism, when Modi and Trump aimed to double bilateral trade to $500 billion by 2030.

Vice President JD Vance had agreed on terms for a trade deal, and Commerce Minister Piyush Goyal had anticipated “preferential” tariffs just days before the hike.

But Kausikan, who was also former permanent secretary of Singapore’s foreign service, said it’s “absurd to think that just because New Delhi is shocked at Trump’s tariffs, his insulting characterization of the Indian economy as ‘dead’ and his flirtation with Pakistan, India will swing to China or Russia at U.S. expense.”

He was referring to Trump’s post on social media, which called the economies of both India and Russia “dead.”

India leaned toward the Soviet Union during the Cold War, but after the USSR’s collapse, India deepened relations with the U.S., especially under Presidents George W. Bush and Barack Obama.

“What brought India and the U.S. together was a shared concern over China,” Kausikan noted. “That concern isn’t going away.”

Today, the two nations had elevated their partnership to a “Comprehensive and Global Strategic Partnership” with cooperation in defense, technology, and clean energy. India was designated a “major defense partner” by the U.S. in 2016.

However, Evan Feigenbaum, Vice President of studies the Carnegie Endowment for International Peace warned in a commentary Monday that Trump’s actions could unravel more than two decades of progress.

Speaking on CNBC’s “Squawk Box Asia,” he said although there were points of disagreement in their bilateral relationship — such as India’s ties with Russia and the United States’ ties with Pakistan — “they never let those third party relationships or concerns bleed back into the bilateral relationship in ways that were very debilitating.”

“All bets are off now,” he added.

India’s External Affairs Ministry responded sharply to criticism over Russian oil purchases Tuesday, calling it “unjustified and unreasonable.” The ministry also pointed out that Western nations criticizing India are themselves continuing to trade with Russia.

Feigenbaum said India sees that as “hypocritical” and “blame shifting,” saying that the West’s collective failure to stop the war is now being pinned on India. He also noted growing unease from New Delhi over the United States’ outreach to China.

Former U.S. ambassador to the U.N. Nikki Haley urged the administration not to “burn a relationship with a strong ally like India,” highlighting that China, which is Russia’s top oil buyer, received a 90-day tariff pause in May.

Prospects for a trade deal appear slim. Feigenbaum said Indian media, the public, and the opposition are urging the government not to show weakness. “Even if there’s a deal, the trust is gone,” he said.

Former Indian Finance Secretary Subhash Garg echoed that sentiment on CNBC’s “Inside India” Tuesday: “Our positions are so different that there is very little possibility of a reconciliation.”

He suggested India should absorb the export hit and diversify to domestic or alternative markets. “If there is an American demand, they will buy and let [the] American consumers and the importers pay the tariff. Let them bear that.”

However, former Indian Labor Secretary Sumita Dawra expressed cautious optimism to CNBC on Wednesday. She said India hopes for “positive outcomes” from trade talks later in August.

She said while tariffs may have an impact on exports, India’s domestic demand is “very high,” and pointed at other trade agreements that the country has been making, such as the India-U.K. free trade agreement and the India-EU FTA, negotiations of which are expected to conclude later this year.

“We’re looking for a fair, mutually beneficial deal,” Dawra said. “I’m sure our negotiators will do a great job.”