Advances In The India-US Trade Talks: A Strategic Partnership To Counter China

New Delhi: In a rapidly shifting global economic landscape, the United States and India are on the cusp of a transformative trade agreement that could redefine their bilateral relationship and bolster their strategic partnership against China’s growing influence. On April 23, 2025, US Vice President JD Vance kicked off high-stakes trade negotiations with India, praising Prime Minister Narendra Modi as a “tough negotiator” while pressing for significant market concessions. With the US threatening a 26% import tariff unless a deal is reached by July 9, 2025, these talks represent a critical opportunity for both nations to deepen economic ties, enhance geopolitical alignment, and counter China’s dominance in the ongoing US-China trade war.

The Free Trade Agreement: India’s Prospects

The proposed Free Trade Agreement (FTA) aims to elevate India-US bilateral trade from $190 billion in 2024 to an ambitious $500 billion by 2030. For India, the FTA offers substantial economic and strategic benefits, but with a few caveats. An FTA would grant Indian exporters particularly in textiles, gems, and IT services greater access to the US market, reducing tariffs and non-tariff barriers. India’s labour-intensive sectors could see a boom, creating millions of jobs.

A deal could attract US companies to invest in India’s manufacturing sector, leveraging its young workforce and strategic location. India’s push to become a global manufacturing hub, as seen in initiatives like “Make in India,” aligns with US efforts to diversify supply chains away from China. India is also advocating for relaxed US visa regimes for its skilled workers, which could boost remittances and strengthen its $80 billion IT services industry.

Strategically an FTA would cement India’s role as a key US ally in the Indo-Pacific, enhancing its influence in forums like the Quad (US, India, Japan, Australia). This alignment strengthens India’s position against China, especially amid border tensions in Ladakh. The trade talks are intertwined with defense deals, including potential US sales of Javelin missiles and Stryker vehicles. A stronger economic partnership could unlock advanced US technologies, bolstering India’s military modernisation. Securing an FTA would shield India from Trump’s future tariff whips, ensuring stable access to the US market while competitors like China face steeper barriers.

Forging US-India relations for a stable Indo-Pacific

The FTA is more than an economic pact, it is a cornerstone for a broader US-India partnership that could reshape the Indo-Pacific. The personal rapport between Modi and US leaders, including President Donald Trump’s description of Modi as a “great friend,” sets a positive tone. Vance’s four-day visit to India, accompanied by his wife, Usha Vance, of Indian descent, underscored cultural ties, with visits to the Taj Mahal and a state dinner hosted by Modi. These gestures, while symbolic, reinforce the deepening trust between the two nations.

The trade talks build on recent milestones, such as PM Modi’s February 2025 Washington visit, where both sides committed to a $500 billion trade goal. Defense and energy cooperation are also expanding, with joint ventures in semiconductors and renewable energy. An FTA would institutionalise this partnership, creating a framework for long-term collaboration in trade, technology, and security.

India as a counterweight to China

The US-China trade war, intensified by Trump’s 2025 tariff strategy, has heightened the need for allies like India to counter China’s economic dominance. India’s unique position—geopolitically, economically, and militarily—makes it an ideal partner for the US to diversify supply chains and reduce reliance on Chinese manufacturing. Here’s how India can help:

With US tariffs targeting Chinese goods, India is emerging as a viable manufacturing alternative. Its $3.5 trillion economy, skilled workforce, and government incentives like the PLI Production-Linked Incentive schemes attract US firms like Apple and Tesla, which are relocating production from China. In fact Apple has recently committed to shift its production base from China to India in light of the trade war induced tariffs. An FTA would accelerate this shift, boosting India’s exports of electronics, pharmaceuticals, and autos to the US.

India’s infrastructure investments, including 100 new airports and expanded ports, enhance its capacity to handle global supply chains, offering US companies a stable, democratic alternative to China.

India’s growing defence capabilities, bolstered by US technology transfers, strengthen its role as a counterweight to China in the Indo-Pacific. Joint military exercises, intelligence sharing, and India’s naval presence in the Indian Ocean deter Chinese expansionism.

Economically, India’s market of 1.4 billion consumers offers US firms a massive alternative to China’s slowing economy. By opening its market selectively through the FTA, India can absorb US exports in agriculture, technology, and energy, reducing America’s trade deficit with China.

Global trade dynamics and India’s technological leverage

India’s burgeoning tech sector, with hubs in Bengaluru and Hyderabad, complements US innovation. An FTA could foster collaboration in AI, cybersecurity, and 5G, reducing dependence on Chinese tech giants like Huawei. While the US seeks to end India’s data localisation rules, a compromise could ensure secure data flows while protecting mutual interests.By aligning with the US, India can influence global trade rules, countering China’s Belt and Road Initiative and its sway in institutions like the BRICS. A US-India FTA would signal to other nations—particularly in ASEAN and Africa—that democratic markets offer a viable alternative to Chinese investment.

India’s role in the US-China trade war extends beyond economics. As a democratic counterpoint to authoritarian China, India embodies shared values of freedom and innovation, strengthening the ideological case for a US-India alliance. By securing an FTA, India can amplify its global influence, positioning itself as a leader in the emerging multipolar world order.

Path Forward

The US-India FTA is poised to be a blockbuster win-win, one of the century’s most mutually rewarding trade deals. With a 90-day tariff pause and a July 9, 2025, deadline, both sides are ready to seal this game-changer. The US can dial back on agriculture and IP to accommodate India, while India opens key markets to show its all-in. Fresh off a 2024 election victory, Modi’s government is primed to drive bold reforms, especially if the US offers visa and industrial goodies. For the US, doubling down on India’s booming economy and anti-China stance is a no-brainer, outshining deals with Japan or the EU. This FTA will turbocharge India’s growth, global swagger, and defences while giving the US a rock-solid ally to diversify supply chains and outpace China. Together, these democratic dynamos will forge a partnership that redefines global trade and sends a bold message: When the US and India team up, the future is unstoppable.