When Prime Minister Narendra Modi tweeted about his “good progress achieved in trade negotiations” after a call with President Donald Trump, it was more than diplomatic choreography. It marked a visible thaw in one of the most strained phases of India-US commercial relations in recent memory—a pragmatic reset after months of tariff battles, oil-related sanctions, and stalled dialogue.

For Washington and New Delhi alike, the revival of talks signals both an economic and geopolitical recalibration, one that could reshape India’s global posture as it navigates between competing great-power rivalry. 

Since early 2025, India has been locked in a bruising trade confrontation with Washington. Punitive tariffs, some reaching 50 per cent, hit Indian exports ranging from textiles to auto components, a direct consequence of New Delhi’s refusal to curb discounted Russian oil imports.

For India, the US measures were seen as excessive and politically tone-deaf, undermining the very strategic trust both nations had cultivated under the Indo-Pacific partnership.

Behind The Scenes Action

For Trump, the issue had turned into another round of embarrassing confrontation with Democrat Senators and Congressmen and leaders from the liberal or progressive Republican faction, who criticised his sudden harsh actions against India, a pivot in US strategies for the Indo-Pacific, as a move which could jeopardise any future alliance of democracies.

Behind the scenes, however, negotiators never stopped talking. Indian Commerce Minister Piyush Goyal’s repeated visits to Washington and quiet working-level consultations gradually built a bridge back to dialogue.

By late September, with US midterm politics stabilising and Washington seeking to rebuild Asian alliances, both sides found reason to de-escalate. The Trump-Modi call capped weeks of intensive diplomacy—an effort to fast-track a long-stalled bilateral trade agreement targeted for signature by November 2025.

Modi, Trump and Optics of Alignment

The optics of the leaders’ exchange were deliberate. Modi’s public reference to “good progress” and Trump’s reciprocal praise, calling Modi a “great friend”, were designed to project harmony and direction. The gestures also marked a reversal from earlier months, when Modi had conspicuously avoided direct engagement amid frustration over the U.S. tariff barrage.

What emerges now is a carefully managed “reset.” The call restored leader-level communication and signaled that political capital is being invested to ensure the trade deal’s conclusion.

It is also a personal recalibration: both leaders see the optics of economic cooperation as strategically valuable in an election-heavy year when global trade realignments are redefining alliances.

It also allows both leaders who are extremely conscious of their public postures and positions to disengage from an ugly confrontation without losing “face”. While Trump can claim victory by pointing out his measures helped bring peace in the Middle East with Indians as major cheerleaders, Modi can claim he has not given up buying Russian oil even as the amount imported is quietly recalibrated.

India’s negotiators have tabled an array of targeted concessions to break the impasse. These include phased tariff reductions on select US industrial goods—premium dairy, automobiles, and alcoholic beverages—and conditional market access for American digital services and medical devices.

More significantly, India has offered to fast-track defence and nuclear purchases from US firms, using big-ticket strategic buys as leverage to secure tariff relief on exports. Talks for a defence pact as well for co-production went into the freezer after the public spat between the two leaders over trade and Russian oil.

Once the reset on trade proceeds, it could transform far more consequential realignment in security and technology, with both nations preparing to formalize a planned new 10-year Framework for Major Defence Partnership.

The proposed framework aims to institutionalise joint military planning, streamline defence trade regulations, and expand logistics-sharing, making the transfer of advanced US technologies to India faster and more predictable. It marks the most ambitious structural upgrade in defence ties since the signing of the foundational logistics and communications agreements nearly a decade ago.

Washington, keen to rebuild trust after a turbulent trade phase, is now offering deeper cooperation through local manufacturing and co-development.

Plans for joint production of Javelin anti-tank missiles, Stryker infantry vehicles, and maritime surveillance technologies will move India further up the defence value chain, while advancing the US goal of resilient Indo-Pacific supply networks independent of China.

India's Bottomline Clear

However, trade ties will mend but not be totally smoothened. On agriculture, New Delhi still remains cautious, resisting deep penetration of US farm products that could threaten smallholder livelihoods. Minor quota increases and procedural streamlining are likely, but red lines remain firm on food security and rural protections.

India’s key demand is clear —  the withdrawal of the 25 per cent surcharges linked to its Russian oil imports and a return to pre-crisis tariff levels. Negotiators have emphasized the need for structural guarantees against future unilateral sanctions, a reflection of India’s discomfort with Washington’s ad-hoc trade weaponization.

Shielding India’s Pharma Lifeline 

In a notable countermove, the US has agreed to exempt most Indian generic drugs from new import tariffs. The exemption preserves roughly $10 billion in annual Indian pharma exports, an industry that supplies nearly half of America’s generic drug consumption.

Washington’s carve-out, framed as a move to “keep drug prices low,” was equally strategic — it reassures US consumers while preventing a supply shock.

New Delhi, of course, sees this as a crucial win. The protection of off-patent, non-branded medicines, core to its export model, offsets much of the pain inflicted by tariffs elsewhere. In return, New Delhi has pledged stronger intellectual property enforcement and smoother regulatory pathways for US pharmaceutical firms.

The energy dimension is perhaps the most delicate. India has quietly agreed to increase purchases of US oil and LNG, signing additional long-term contracts to rebalance trade. Yet this shift is calibrated, not absolute.

Russian crude, still cheaper and logistically entrenched, will continue to flow into Indian refineries but in lower volumes. The US aim, thus seems to be not to eliminate Russian supply, but to nudge diversification, gradually increasing its own share of India’s energy basket while eroding Moscow’s pricing leverage.

India’s strategy is to trade flexibility for stability — appeasing Washington while retaining autonomy. Increased US energy imports create negotiating goodwill without surrendering the cost advantages that Russian oil still offers.

The Quad, China, and Strategic Leverage

This revival in trade diplomacy dovetails with a broader strategic rebalancing. As India re-engages with the US, its alignment within the Quad (with Japan and Australia) is being re-energised. The trade thaw gives New Delhi new confidence to reassert its Indo-Pacific role, especially in maritime security, digital infrastructure, and resilient supply chains.

At the same time, India continues cautious overtures toward Beijing as a hedge against US unpredictability and a reminder that its foreign policy remains one of calibrated autonomy.

However, the trade breakthrough with Washington unmistakably tilts the balance as it reduces dependence on the China-Russia axis and enhances India’s leverage as a “swing state” in the evolving multipolar order.

The Modi-Trump conversation may appear transactional, but its implications are strategic. If the trade agreement concludes by November, it could mark a turning point, redefining not just tariffs, but the trajectory of India’s global engagement.

Re-engaging India economically strengthens Washington’s Indo-Pacific hand. New Delhi, on the other hand, gets a deal which restores its credibility as a global growth engine and signals that India can defend sovereignty while staying firmly in play among the world’s major powers. The era of tariff skirmishes may not be over, but a reset, anchored in pragmatism, energy diversification, and shared strategic interest, is unmistakably underway.

(The writer is a senior Indian journalist and geopolitical analyst. Views expressed are personal)