Why did America cross the road? Right now, it’s to put tariffs on all its allies. The most notable of its tariffs have been on India, an economic powerhouse that has been both geopolitical and economic. Despite India’s progress putting them at the frontrunner to become the largest economy by 2050, in the Economist on August 28th, Trump announced 50% tariffs on the country, impacting $130 billion of trade built over decades of diplomacy. This rash decision marked a turn in a formidable alliance that enabled US geopolitical influence in South East Asia, a region dominated by Chinese presence. Yet, after months of high tariffs impacting India’s economic capacity by 2 billion USD [2], India has given into the main request of the Trump administration: a significant reduction in Russian oil imports.
As a result of the new deal, US tariffs on India will be reduced to 18%, which is still a significant amount for a country that’s main value comes from cheap prices.
This begs the question: Why accept the deal?
The answer lies in becoming a global manufacturing powerhouse. Currently, India’s manufacturing markets are much more overstated than what they currently produce. In fact, India only produced ~460 billion dollars worth of goods compared to the US’s nearly ~2.9 trillion in 2025. While textiles and gems largely are sourced from the nation, oftentimes the manufacturing is region specific and investment goes towards the rapidly expanding tech sector[6]. India’s government has recently tried stimulating the sector with subsidies and projects, yet access to diverse supply chains continues to choke any form of private investment. However, their newfound acceptance of the US not only gives access to stable and private supply chains internationally, but also has the potential to bring in billions to remedy a drought of current international investment [6].
Yet several complications in the deal still remain. Within the current agreement, Trump stated India plans to invest nearly $500 billion into US energy and agriculture, a point that Modi completely failed to state in his announcement of the deal. Along with that Trump promised that India would eliminate its tariffs on US agricultural exports , in order to appease soybean farmers and agricultural workers impacted by Chinese trade wars [5]. Even with such robust claims, it seems Trump’s rhetoric is not backed up by Indian action. Currently, India’s investment of 500 billion seems implausible as even with all of its current imports, it only tallies about 83 billion dollars. Furthermore, India’s tariffs are focused on restricting genetically modified plants and cattle fed with animal by-products, strict rules which they have indicated no intent to waver from[6]. Surely enough, two days after the deal, Piyush Goyal, India’s commerce minister, stated that agriculture and dairy would see no significant changes, later confirmed by US trade representative Jamieson Greer [6]. While these opposing ideas for now have not caused many issues, it may create future conflicts when India fails to meet the bar set by the Trump administration.
The last site of confusion around the deal is the question of when India will cease Russia energy imports. Right now, the answer is unclear because no timeline was ever established and there were no confirming statements made by India or the Kremlin[3]. Due to tightening US sanctions India had already been decreasing its imports of Russian oil, but there has been no change in the amount of oil shipped to India’s ports after the recent announcement. Most likely, India will continue to slowly ween off Russian oil to ensure stability with the US and in their own economy.
With one of the largest allyships back together, India will finally be able to breathe an economic sigh of relief as the rupee has rallied in support of the two nations coming to truce. Investment is increasing, the rupee is stabilizing, and the US has saved itself from completely losing a key ally to China. While this is great news, Trump’s unpredictable agenda means that countries remain on their toes. With Japan and South Korea, Trump proposed high tariffs after not meeting investment targets set with previous tariff negotiations, and deals with the EU didn’t stop Trump from threatening tariffs over Greenland, suggesting that India’s future may not be in the clear just yet [6]. While America may have stepped back, they can cross the road once again, possibly putting India’s markets once again at risk.
Sources:
[2] https://usispf.org/wp-content/uploads/2023/04/U.S.-India-Bilateral-Trade-Data-Analysis-updated.pdf
[3] https://www.economist.com/asia/2025/08/28/narendra-modis-secret-weapon-the-indian-consumer