The Art of the Dealbreaker

Donald Trump’s second presidency is testing the limits of the Indo-American relationship. India must decide whether the partnership is worth the price.

There was a time not long ago when the Indo-American relationship seemed to glide on the wings of inevitability. Two democracies, sharing market instincts and wary of Chinese hegemony, appeared destined for deeper strategic embrace. Washington called India a “natural ally” while New Delhi played host to presidents and prime ministers with red carpets and defence deals. The diplomatic prose was florid, the symbolism rich.

But half-a-year into Donald Trump’s second term, that romance has soured into something far more brittle and transactional. India is discovering what many allies have already learned - that under Trump, deals come with strings, trust is fleeting and admiration is no substitute for alignment. The question before India is no longer whether to partner with America but how much sovereignty, stability and strategic patience such a partnership is worth.

History has always cast a long shadow over Indo-US relations. During the Cold War, America’s fondness for Pakistan and India’s lean towards Moscow fuelled decades of mistrust. That began to thaw after India’s economic liberalisation in the 1990s and crystallised in 2005, when George W. Bush pushed through the landmark Civil Nuclear Deal. Ever since, successive administrations in Washington, both Republican and Democrat, have sought to draw India into the American-led strategic order.

Trump, by contrast, sees no use for sentimentalism. His return to power has stripped the partnership of its ceremonial gloss, particularly exemplified after India’s Operation Sindoor, which saw Trump rushing to claim ‘credit’ for a chimerical nuclear war he claimed to have stopped. The last straw was his hosting of Pakistan’s Army Chief Asim Munir to a White House lunch.

In his tariff war against India, Trump has upended treaties and trade frameworks, with everything on the table - from tariffs to technology transfer - up for renegotiation, reconsideration or retaliation. For a country like India, which guards its strategic autonomy like a national treasure, this is a difficult environment in which to build lasting trust.

Nowhere is this tension more visible than in trade. Bilateral commerce, though growing, is hobbled by American protectionism. Trump has revived across-the-board tariffs, decreeing a levy of 10 percent on most imports including steel, electronics and pharmaceuticals, targeting sectors where India is both competitive and ambitious. The Generalized System of Preferences, suspended during Trump’s first term, remains in limbo. Talks on a digital trade agreement have gone nowhere. And with no free trade agreement in sight, even modest gains come with caveats.

India’s famed IT sector and its burgeoning pharmaceutical exports are particularly exposed. Meanwhile, Trump’s unpredictability on data localisation, digital taxes and platform regulation has unnerved Indian entrepreneurs and investors alike. Washington may see India as a growth market, but it increasingly treats it like a regulatory irritant.

Defence cooperation has followed a similar arc: expansive on paper, transactional in practice. India has bought over $20 billion worth of American military hardware, from transport aircraft to helicopters and surveillance systems. Foundational agreements like COMCASA and BECA have opened the door to deeper interoperability. Joint exercises have multiplied and the Quad has grown more cohesive.

Yet beneath the surface, uncertainty brews. Trump’s disdain for alliances makes long-term military planning difficult. His preference for deals over doctrine means that arms sales could become levers of coercion. CAATSA, the U.S. sanctions regime targeting Russian defence partnerships, continues to dangle over India’s S-400 missile purchase. A previous waiver granted by Congress now looks increasingly tenuous under Trump’s unilateralist instincts. New Delhi must ask whether the price of American interoperability is worth the risk of strategic dependence.

The technology relationship, once seen as a crown jewel of the partnership, is now fraying. The iCET initiative, launched with much fanfare under Biden to facilitate joint work on AI, quantum computing, semiconductors and space, has lost momentum. Export controls remain tight. India is still denied “trusted partner” status and collaborative ventures - from chip fabrication to clean-tech - are suffering from a lethal mix of bureaucratic delay and political disinterest.

India’s best hope may lie in strengthening parallel partnerships with Japan, the European Union and South Korea. But such hedging takes time, and Washington’s mercurial mood leaves little of it. Even flagship collaborations like NISAR, the joint NASA-ISRO Earth observation satellite, now risk falling victim to budget cuts and shifting priorities.

For Indian students and professionals, the cost of this drift is deeply personal. With more than 200,000 Indian students in the U.S., and hundreds of thousands more on H-1B and L-1 visas, America has long been the destination of choice for India’s talent. But Trump’s tightening of immigration norms, caps on work visas, and slow-walking of green cards have created a chilling effect. The Indian-American dream feels more precarious than ever.

This is all the more ironic given the extraordinary contributions of the Indian diaspora to American life. From the CEOs of Google and Microsoft to Nobel laureates and lawmakers, Indian-Americans have become a fixture of American innovation and influence. Their median income (over $140,000) makes them one of the most prosperous ethnic groups in the U.S. Their lobbying power is growing. Yet under Trump, they are being asked to prove their worth all over again.

In diplomacy too, the clash is growing starker. Trump’s worldview is aggressively zero-sum while India’s is sensibly multipolar. While the two countries continue to coordinate in the Indo-Pacific, their stances on Russia, Iran and even Israel increasingly diverge. Washington wants India to fall in line on Ukraine, on Taiwan, on sanctions regimes. India prefers calibrated autonomy, resisting overt alignment.

The conflict is most visible on sanctions. Trump has reimposed secondary sanctions on Iran, choking India’s energy imports. CAATSA remains a sword over India’s defence transactions. And now, pressure is mounting to curtail ties with Russia further. India is responding by building payment alternatives in form of the rupee-rouble trade, UPI cross-border linkages and SWIFT substitutes.

There is a broader trust deficit at work here. For all the rhetoric of shared values and democratic ideals, many in New Delhi increasingly view the United States as an erratic partner – one that is ideologically inconsistent, institutionally fragile and selectively moralistic. America’s tendency to lecture India on internal affairs - from Kashmir to press freedom - grates on a political establishment that now sees itself as a civilisational equal, not a subordinate. Trump’s America only intensifies this friction: more hectoring, less listening.

And yet, the relationship remains underpinned by powerful structural incentives. The U.S. needs a stable, rising India to counterbalance China and anchor the Indo-Pacific. India needs access to American technology, capital and markets. But for this partnership to endure, it must be built on realism. India must diversify its dependencies and assert its diplomatic red lines with greater clarity.

The strategic choice for India is not whether to walk away, but how to stay in with its eyes open. That means pursuing limited, targeted cooperation in areas of mutual interest like clean energy, AI and maritime security while hedging elsewhere. It means engaging Washington as a ‘friend’ but never assuming permanence. Trump’s return is a reminder that in a world shaped by populism and polarity, partnerships must be managed, not assumed.

The Indo-American relationship has always required careful calibration. Under Trump 2.0, it demands even more discernment, discretion and, above all, the courage to say no when national interest dictates. The art of the deal, after all, includes knowing when to walk away.

(Dr. Kishore Paknikar is the former Director, Agharkar Research Institute, Pune and Visiting Professor, IIT Bombay.)