Can the US and India repair ties over trade and China? | Counting the Cost

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[00:00:13]Hello, I'm Sammy Zan. This is Counting the Coster, your look at the world of business and economics. America first or India first? US Secretary of State Marco Rubio visited India to repair ties with New Delhi. But can the two countries overcome tariff tensions and reach a broad trade deal? A counterweight to China, Washington wants closer ties with India as competition with Beijing grows.

[00:00:41]But can the US build trust when its trade policy keeps changing?

[00:00:53]A relationship built over decades but strained in just recent months. You see, the US Secretary of State Marco Rubio spent four days in India trying to steady ties after tariff disputes and trade tensions. Both sides say they're moving towards a broader trade deal after agreeing earlier this year to an interim one covering energy, technology, and defense. Well, the visit comes at a critical moment. A global energy crisis triggered by the Iran war has forced India to make urgent choices about where it buys its oil and gas. Washington wants to sell India more energy supplies. But when sold at a discount, Russian crude remains cheaper. China has also overtaken the US is India's biggest trading partner. So, is New Delhi moving closer to Washington or keeping its options open? Finton Monahan reports.

[00:01:53]>> The United States and India are looking to stabilize what's become a somewhat rocky relationship.

[00:01:59]US Secretary of State Marco Rubio and Indian Foreign Minister Subramanyan Jaishankar had wide-ranging talks, but one of the key issues was trade. We are ultimately seek and believe we will arrive at trade arrangements around the world that are good for the United States but also good for our trade partners and one of those we hope will be India.

[00:02:19]>> We spoke about the value of concluding at an early date the final text of the interim agreement regarding reciprocal and mutually beneficial trade. uh this will be an important step towards a comprehensive bilateral trade agreement.

[00:02:36]>> Under the Biden administration, the US courted India as a strategic counterweight to Russian and Chinese influence in Asia. But under the second Trump administration, the two sides became divided over trade.

[00:02:49]>> India's been uh to us just about the highest tariff nation anywhere in the world. They've been very strong on tariffs and I don't blame them necessarily but it's a different way of doing business. It's it's very hard to sell into India because they have trade barriers very strong tariffs.

[00:03:07]>> In 2024, India had an average tariff of 17% compared to the US 3%. It also enjoyed a trade surplus with the US of around $50 billion.

[00:03:18]In April 2025, the US imposed a 25% tariff on imports from India. This was framed as leveling the playing field against India's trade restrictions. That tariff was later doubled to 50% in a bid to pressure New Delhi to end its imports of Russian oil. A truce was worked out in February. The US tariff dropped to 18% and both sides agreed to pursue a comprehensive trade deal, but that has yet to be finalized. Since then, Trump's trade policies have faced challenges in the US Supreme Court, leading to further tariff reductions.

[00:03:52]In the meantime, India has strengthened partnerships elsewhere. It signed comprehensive trade deals with the EU and the UK, who've also been under economic pressure from Trump's tariffs.

[00:04:03]China has overtaken the US as India's largest trading partner, with bilateral trade reaching more than $150 billion in 2025, and India and Russia are aiming to do hundred billion dollars in annual trade by 2030. India has rapidly developed into one of the world's key economic players.

[00:04:22]Its economy has grown rapidly, quadrupling in size since the year 2000.

[00:04:27]In recent years, it's positioned itself as an alternative manufacturing hub to China. The Modi government is seeking to triple the nation's exports by 2035, focusing on several key areas, including semiconductors.

[00:04:40]But doing this may require a fresh start with the United States. Both sides are looking to move past their differences.

[00:04:46]But forming a true trade partnership may be a challenge in what's becoming an increasingly protectionist world.

[00:04:54]>> Well, let's discuss this further with our panelists. We have joining us from New Delhi, Brahma Cheleni. He is a political economist and professor of strategic studies at the center for policy research. From Los Angeles, William Lee. He's a chief economist and managing director at global economic adviserss. And from Manila, we have Jayant Menon. He's a senior fellow at the ISAS Ysef Ishach Institute and a trade policy specialist. Let's start with William in Los Angeles. William, has the Rubio visit to India resolved those remaining tensions? Has it moved the parties closer to a more comprehensive and lasting trade agreement? Well, Sammy, I think the visit from uh Secretary Rubio really caps off a trend in the strategic relationship between the United States and India that is not only a positive trend but also a a historic one. uh we have to remember that u despite all of the vagaries of uh headlines that we see in the last few months the key is where it is that we see the money going where are the assets going and strategic relationship that India has developed with the United States has just grown stronger and stronger uh and what the big example of that is the asset transfer and technology transfer of allowing India to develop uh advanced jet engines uh manufactured by GE um also the deals that are being made for uh development of small modular nuclear reactors to try to ease India's energy crisis. Uh I I think these are the capstones for where the assets are moving. Uh and they represent an increased strategic partnership that I think overwhelms any kind of headline noise that we see from time to time. So I think the the key to Rubio's visit is one where you have to say the US and India are really looking toward the future in a strategic manner and strategic partnerships that'll last for generations.

[00:06:54]>> All right. Follow the money. I like that. I think that's the line that William is is taking on this one. Brahma in New Delhi is the trust following the money. Has the Rubio visit put aside or put behind the two, you know, those trading of or or the or what was seen in India as insults towards India, the trading of of tariffs and that nasty patch and is trust back at where it was.

[00:07:24]>> Successive US administrations, Republican, Democratic alike, invested heavily in building the partnership with India. They treated India not merely as a market but as a long-term strategic bet that accumulated goodwill is now badly frayed. Trump has inflicted real damage to the US India relationship. Uh as everybody knows uh Trump's second presidency has brought repeated insults and a bruising trade war. Trust is the essential currency of any strategic partnership.

[00:08:00]Once eroded, trust is not easily rebuilt. Ironically, Trump may have rendered India an unintended service by exposing the raw transactionalism at the core of his foreign policy. Trump has clarified a hard truth under his leadership. The US is more interested in what it can extract from its allies and partners rather than be a reliable strategic partner.

[00:08:31]>> Won't money fix that though if we follow the money and the logic of William's argument. Brahma, >> I I would temper um you know that argument uh on on on money because if you look at the GE engine deal, it's not really a full technology transfer. It's only about 80% of the technology will be shared with India.

[00:08:56]The source codes and other critical uh aspects of engine manufacturing will not be shared with India. and and that deal has come after many many years of negotiations. It really goes to show that that um that the damage to the relationship uh cannot be repaired by one or two deals, however important they might be. And I think um it's important to remember that strategic partnerships are sustained not by tariffs and threats, but by predictability, mutual trust, and mutual respect. the very qualities that have been absent of late.

[00:09:37]>> Let me give William a a quick chance to come back in but briefly William before we shift things along to Manila.

[00:09:45]>> Absolutely. And and and I think want to remind everyone that this is the first time the United States has had a partnership of this sort of defense technology transfer outside of NATO partners and India is the only country that's that that is in that role. And and when we talk about the the kind of uh use of tariffs and and the so-called trade war uncertainty that Braman has talked about, President Trump's been very clear to use tariffs as an incentive to shift investment flows into strategic industries in the United States and our partners and and I think that's the key to the tariff uh use that that we've seen over the last year.

[00:10:21]William, I think the point was very following money is the reality.

[00:10:26]We've seen those tariffs sometimes brought against allies as well, right?

[00:10:31]>> Because of investment incentives because the the key was our allies were not coming forth with the kind of investment uh agreements that that they had initially agreed to. And so Trump raised the tariffs to say where's the money?

[00:10:42]Where's the investment that's supposed to come in here? So it's really enforcing agreements that that that really is uh accounts for a lot of that v variability. Jant looking at the discussions that and the statements you've got to wonder does do India and the US have the same economic priorities they they may have mutual interests do they have the same level of economic priorities at this point how do you read it >> um I think um India and the US have a lot to gain from increasing commercial relations uh trade trade and investment.

[00:11:22]Um at the moment uh you know India has the uh massive surplus of the US and the US is responding to that in trying to balance trade. But I think uh what we have to keep in mind is that um you know uh trying to balance bilateral trade flows using tariffs has never worked and will not work in this case as well. um you know India has now agreed to buy a few more goods u $500 billion worth of goods actually from the US but these are goods that was already buying and it needs and it shouldn't be taxing these goods anyway uh the question now is where do we go from here India wants I think certainty on US trade policy which has been all over the place so far uh you know it wasn't that long ago that they were facing about 50% tariffs before the US Supreme Court struck it down.

[00:12:21]>> But now we've got concerns about 301 tariffs coming in recreating their situation. So uh I think yes there are gains to be made by stabilizing the relationship but a lot is still unclear about how we go forward from here. So, whatever the lack of clarity there was when it comes to some of the bilateral issues, it does seem that Rubio's visit concluded with a critical minerals framework maritime surveillance cooperation for what's known as the Quad Group and the group's first joint infrastructure project. All part of a push to counter China's influence, what's been called the Indo-Pacific. So, why is the region so important to the US? Well, the Indo-Pacific is increasingly used to describe a geopolitical view of Asia shared by the US and its allies. Put simply, it's a relabeling of Asia-Pacific to include India. The term links the countries touching the Indian and Pacific oceans into a single strategic and economic region. It's home to more than half the world's population, accounts for 60% of global GDP. US presidents, including Donald Trump in his first term, tried to pull India closer as a counterweight to rising Chinese influence in the region.

[00:13:35]But those ties were strained when Trump imposed some of the highest US tariffs on Indian goods. Washington strengthened cooperation with India, Japan, and Australia through the Quad Partnership.

[00:13:50]The group has become a key platform for cooperation on maritime security and supply chains. The rivalry between Washington and Beijing is reshaping the Indopacific economy, rewriting trade flows, supply chains, infrastructure and energy security.

[00:14:07]Well, let me bring Brahma in uh back into the discussion on this one. So Abrahim I mean looking at all of this is India and the US you know they may have signed on Tuesday that bilateral framework also to secure the supply and processing of critical minerals rare earth but realistically how far can India go to replace China is that a realistic ambition or goal >> India for a number of years has been now trying to build closer partnerships with western countries. So there is a uh unspoken pro west tilt in Indian foreign policy.

[00:14:53]So this um so this um rift with the US since last year has obscured the fact that India consciously has sought to diversify away from both China and Russia and build closer economic and strategic partnerships with western countries. But the raw transactional transactionalism of Trump has upset India's strategic calculus who were talking about the Quad. So let's not forget that the that America's Quad coalition with Japan, India and Australia is today at risk of strategic irrelevance. The Quad is a drift. the the Quad foreign ministers meeting that was held today in New Delhi was supposed to actually announce a leaders summit meeting later this year but they met with no announcement of a summit meeting. The signs of drift drift are unmistakable and and one reason why the Quad's momentum has stalled is Washington's China policy has fundamentally shifted under Trump. It has shifted from confrontation to selective accommodation of China. In fact, for India, it's you know it's um the situation uh is quite uncomfortable.

[00:16:18]Trump has moved closer to both of India's regional adversaries, China and Pakistan. And and this is where the rift becomes apparent. The US and India talk about being global partners, but India's own immediate neighborhood. The US and India are not on the same page. They they're working uh in ways that actually are antithetical to each other's interests. the US in particular is is uh working um in India's immediate neighborhood in India's own strategic backyard in ways that that actually are um are unfriendly to India's strategic interests.

[00:17:01]>> Okay. I can see William sorry Brahma I can see William is shaking his head I'm guessing in disagreement. So let me give you a chance to come in on on that point that is there really an inconsistent policy from the US that undermines the goal perhaps or the US goal of developing India as an alternative supply chain for the US.

[00:17:22]>> Not at all. I think what you have to distinguish would be between strategic uh partnership agreement and moves there and tactical changes uh because of the the landscape. And I think what what you've just heard is an example of why economics is called the dismal science.

[00:17:37]So I you know Brian's taking a very negative view of what I think are actually very positive developments.

[00:17:43]This is the first time that we've had the quad meeting chair uh you know meeting of foreign ministers in India.

[00:17:50]Uh and it shows India's geopolitical strategic position. That's something that doesn't move. India is firmly enscconced in the in the you know South Pacific and the Indian Ocean where where it strategic position alone makes it a very special partner that the US was wants to develop along with the other members of the Quad and the and as far as the middle deals are concerned I think you have to remember why does China have such a choke hold on the world because of its monopoly position in in in key choke points like refining of strategic minerals uh it's not so much that they have a lot of strategic minerals but they have the refining capacity more than anybody else and if even if you hold strategic minerals you got to go to China to process it and what we're trying to develop with India is that the capacity to have its own strategic choke points to to be able to have India in a position to offset the kind of choke hole that China has had on the world. So I think the the key to the development of the US uh uh India partnership is one of looking at strategic moves. Uh it's almost like um comparing weather and climate, right?

[00:18:59]Ignore the weather reports, ignore the communic case. What you really have to do is look at where the climate report is changing and where the climate is changing. And for the US and India, the climate is nothing but improving uh because of the key strategic needs of both countries.

[00:19:14]>> Okay. the climate improving a question mark though when it comes to energy security about how much improvement is going on that was at the top of the agenda during Rubio's visit the USIsrael warn Iran of course led to a major disruption at the straight of Hormuz one of the world's vital shipping lanes this has had a major effect on India 20% of the world's oil and gas usually ship through the straight India was one of its main destinations It's forced Indian state-run fuel retailers to increase petrol prices four times in the past 3 months. India has turned to Russia to make up the shortfall and the US granted a waiver on sanctions that was recently extended.

[00:20:01]But the Trump administration has been pressuring India to import more oil and gas from the US and Venezuela. Now analysts are predicting Indian purchases of American liqufied petroleum gas and natural gas will hit record levels in May. The disruption at the straight of Hormuz has impacted the livelihoods of many Indians though.

[00:20:25]>> We're facing a lot of problems. I had to shut my business for two weeks because of this. I was struggling to find cooking gas. Now we're using charcoal.

[00:20:34]If that also becomes difficult to procure, I will have to shut down my business again. Even if this hormuz opens tomorrow, I mean freight rates will still remain high. The you know supply chain, there's a lot of congestion that was built up. There's a lot of infrastructure damage that has happened to a lot of ports. So it will take at least four to 6 months for things to get back to normal.

[00:20:57]So Jant in Manila, you know, all we've been talking about so far in this show, building that alternative supply chain that needs fuel, fueling that economic partnership and alliance. Do you think the energy policy of India perhaps even the entire world to a big degree depends on what happens next in the straight of Hormuz as to whether you know which way we'll see the Indian imports shift further in the future when it comes to energy?

[00:21:29]Uh yes, I think of course it's going to have a major impact and as one of your uh interviewees said uh the effects of this will linger for quite a long time and so uh you know uh diversification of sources will be again the catch cry uh but you know India is going to be affected but this region of Southeast Asia where I am is affected even more and you know Philippines is really suffering. ing. Uh we have found out how important oil uh is to not just uh gasoline uh and fuel but to almost every other aspect of every sector agriculture and industry manufacturing and um it's not just um you know oil and LNG but phosphate helium everything's being affected. So uh there's a lot of disruption and I think the again we need to think about diversifying sources and this is a push for the green transition.

[00:22:34]I mean you self-reliance would be the best way to go forward to reduce risk to external shocks. William, right now American energy may be looking more competitive, right, as oil prices are high. But if the Straits of Hormuse crisis is resolved, if we start to see oil prices coming down again, Russian crude is going to be looking more competitive, is it not? Um, will that not become an issue between India and the US as the US continues to try and pressure India to buy US energy? if uh you know it can get a discounted deal elsewhere.

[00:23:15]>> The key to what's happened is that the Iran has taught the world that we need reliable supply chains for energy. uh and the US represents uh India's strongest card not only in this our supply of lowerric natural gas but also in our deals that we've just made with India about small modular nuclear reactors and and to go with Jon's uh you know claim of wanting to have more independence how more independent can you be than to have your own small nuclear reactors and those are the trade deals the strategic deals that are being talked about right now uh with Rubio's visit that that are being cap you know closed right now. So I think the US uh technology transfer not only in defense but also in energy uh and in semiconductors by the way to make India a a major production point for semiconductors places India in that global strategic position of offsetting the choke hole that China's had on the world but also provides India with a platform of becoming the the third largest economy in the world by 2030 which most estimates are are are now showing. So I think the US is India's strongest card and I think uh the Rubio visit has has done nothing but to emphasize that.

[00:24:25]>> Okay, that's a good point. Let me take it to Abrama. We can make that argument on the one hand say look the Indian economy is going to get help with nuclear facilities and production. It's going to be getting investments in in semiconductors.

[00:24:43]Will that offset the issue of what could potentially down the road be higher petroleum prices if it has to move away from from Russian uh production or Russian oil. The cost to the Indian manufacturing and agricultural sectors if tariffs are to come you know down and linger at lower around zero levels would that be the offset that would be acceptable to India? Well, first India is a global leader in commercial nuclear power.

[00:25:16]The cost of commercial nuclear power in India is the lowest in the world and this is from Indianbuilt reactors. So India doesn't need smaller reactors from the US. The US needs these these modular reactors to be built in the US. The US has not built a single nuclear reactor in in many many years. India is building a series of indigenous nuclear reactors today.

[00:25:48]One other thing that we have to keep in mind the landed cost of US energy is the highest among all energy sources. The cheapest energy for India today is from the Middle East. And the irony is this. that under US pressure, under Trump's pressure, India drastically reduced its imports of Russian energy and began importing more energy from the US and from the Middle East. Then then Trump launched his reckless war on Iran and and that is the root cause of the present energy shock. the the wor this this is the worst energy shock in modern times for the world and this has been caused by a war that is deeply unpopular at home in the US and has been a war of of choice not a war of necessity and today the US blockade of the state of hormones is the main reason why the global economy is still really and I think for India >> this this double whammy has proved very costly.

[00:26:59]>> I'm afraid we're going to have to leave it there. So, let's thank our guests at this point. Brahmed Cheleni, professor of strategic studies at the center for policy research. William Lee, chief economist and managing director at global economic adviserss and Jayant Menon, senior fellow at the ISAS Ysef Institute. Thank you all for joining us.

[00:27:20]And that's it for our show. Get in touch with us on X and do use the hashtag AJTC when you do or drop us an email counting the costal.net is our address.

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[00:27:43]That's it for this edition of counting the cost. I'm Sami Zan from the whole team here. Thanks for joining us. The news on Alazer is next.