In a recent analysis, economist Andres Velasco has characterized the United States' approach to India, a key ally, as a significant strategic misstep, particularly highlighting the imposition of tariffs. Velasco's assessment arrives amidst growing concerns about the trajectory of the U.S.-India relationship and its broader implications for global economics and geopolitics.
Velasco suggests that the U.S. is undermining its own interests by alienating a strategically important partner like India. He points to India's increasing global prominence and its role as a democratic counterweight in a shifting world order. Mistreating India, especially through measures like tariffs, risks pushing it towards alternative alliances and potentially bolstering blocs such as BRICS, which could emerge as a stronger economic alternative to Western dominance.
The economist's critique aligns with a broader discussion on the challenges and opportunities within the U.S.-India strategic partnership. While the two nations share common interests, including concerns about China's rise and maintaining stability in the Indo-Pacific region, several factors complicate their relationship. These include India's longstanding defense and commercial ties with Russia, its cooperation with Russia in the Arctic region, and its relationship with Iran.
Some analysts suggest that the U.S. had hoped India would play a larger role in countering China. However, India's commitment to strategic autonomy and multi-alignment often diverges from the U.S.'s desire for primacy. These differing objectives require skillful diplomacy and continuous communication to maintain a cohesive strategy.
The imposition of tariffs has further strained the relationship. In August 2025, tariffs on Indian goods reached as high as 50%, leading to significant capital outflows and potentially slowing India's GDP growth. Sectors like textiles, jewelry, electronics, and pharmaceuticals are particularly vulnerable, with potential job losses.
Despite these challenges, the U.S. remains a major investor in India. Bilateral trade in goods and services has been on the rise, surpassing $200 billion in 2023. The U.S. is also India's largest trading partner. However, the tariff disputes and protectionist measures create uncertainty, affecting investment decisions and long-term planning.
Velasco also offered advice for India, urging the country to continue pursuing economic reforms to enhance its competitiveness. He specifically mentioned addressing non-tariff barriers and simplifying the tax system. Continuous innovation is also vital for India to overcome global challenges and sustain its economic growth.
Other economists have also weighed in on the situation. Kaushik Basu, former Chief Economic Advisor to the Indian government and World Bank Chief Economist, cautioned India against retaliating with matching tariffs, arguing that it would hurt India more than the U.S. Basu suggested that the U.S. is isolating itself with its trade policies and that India should focus on cultivating economic and diplomatic ties with other countries.
The U.S.-India relationship has weathered numerous transitions and challenges. Both countries need to focus on strengthening their strategic, economic, and multilateral relations to harness the full potential of this partnership. The current global landscape presents both opportunities and challenges, requiring both nations to navigate their relationship with foresight and strategic acumen.
