A diplomatic dichotomy

Since January 20, 2025, after Donald Trump became the president of the world’s largest economy for the second term, his executive orders and steep increase in import tariffs, to protect America’s business interests, have created major disruptions in the international trade and political climate across the globe including India.

Trump’s administration is rapidly reshaping the US government policies and the impact of his decisions is being felt globally. Trump has made it clear that he wants overseas spending to be closely aligned with his “America First” approach. Among the numerous ‘executive orders’ signed by the US President, three orders, in addition to the order on forced deportation of illegal migrants, namely, US exit from global cooperation on health, climate change agreement and shut down of US Agency for International Development (USAID) have attracted serious criticism, both at home and abroad, against the US administration. Experts warn that Trump’s dismantling of USAID raises the risk of m-pox (formerly known as ‘monkey pox’) global emergency.

Is the US ceding global influence to its rivals?

The World Health Organisation (WHO) and World Meteorological Organisation (WMO) highlighted the massive potential negative impact on public health and efforts to curb global warming due to President Trump’s executive orders ending US membership of the WHO and its adherence to the Paris Climate Agreement. The US was the largest single donor of the WHO, accounting for 18 per cent of the agency’s budget in 2023.

Referring to the recent devastating and deadly massive wildfires that ripped through Los Angeles, the WMO spokesperson noted that the US had suffered the bulk of global economic losses from weather, climate and water-related hazards.

The Trump administration reportedly intends to merge the US government’s main overseas aid agency-USAID with the state department. President Donald Trump and one of his top advisers, billionaire Elon Musk, have been strongly critical of the USAID. Speaking to reporters at the White House, Trump alleged that the agency, run by “radical left lunatics”, was getting away with “tremendous fraud”. Elon Musk has previously claimed that the USAID was “a criminal organisation” and that Trump has agreed to “shut it down”. Closing USAID is an “illegal, unconstitutional” move, Democratic lawmakers said at a press conference outside USAID offices in Washington.

USAID was set up in the early 1960s, during the cold war period, to administer humanitarian aid programmes on behalf of the US government. It was created, primarily to help the US administration advance its soft power through economic and social development, combine several existing foreign aid programmes and organisations into one agency and most importantly make it easier to counter Soviet influence abroad. USAID was created by President John F Kennedy via Congress’s Foreign Assistance Act in 1961. That law mandated for a government agency to be set up and tasked with administering overseas spending. The agency’s status as an executive agency was enshrined by US law in 1998. This means Congress must agree to its dissolution.

In 2024, USAID employed around 10,000 people, two-thirds of whom worked overseas and operated in more than 60 countries. According to government data, the US had spent USD 68bn on international aid in 2023. That total was spread across several departments and agencies, but USAID’s budget constituted more than half of it at around USD 40bn—that’s about 0.6 per cent of total US annual government spending of USD 6.75tn. The vast majority of USAID money is spent in Asia, sub-Saharan Africa and Europe—primarily on humanitarian efforts in Ukraine.

The US Department of Government Efficiency (DOGE) highlighted that USD 29 million had been designated for “strengthening the political landscape in Bangladesh” — a country that faced political unrest last year amid accusations of US interference in the removal of former Prime Minister Sheikh Hasina. Another USD 39 million was earmarked for “fiscal federalism” and “biodiversity conservation” in Nepal, alongside other international funding initiatives.

After the disintegration of the Soviet Union and end of the cold war in 1990s, the USAID lost its relevance as an agency to advance USA’s soft power, to counter Soviet influence, through economic and social development. Since 2013, when China under the leadership of its new President Xi Jinping, emerged as a new economic power and leader of the Global South, USAID has miserably failed to retain US hegemony on the global economy. By February 2025, the number of countries that have joined the Belt and Road Initiative (BRI)—a China led global network of countries, spread across all the continents—by signing a Memorandum of Understanding (MoU) with China was 149. Two countries—Italy (2023) and Panama (2025)—have exited BRI. India is a major exception which has refrained from joining this Chinese initiative.

Analysts argue that Trump administration’s recent “America First” moves, from the dismantling of the USAID to quitting international groups (WHO and Paris Agreement), have raised concerns among some lawmakers and experts about whether the US is ceding global influence to its rivals, especially at a time when Washington is worried about Beijing’s growing clout at the cost of American interests.

Mounting federal debt

Burdened with huge public debt, higher than the GDP, the USA President appears to be very nervous as he has rightly realised that mounting debt can lead to the collapse of US dollar’s dominance in the global economy. Federal debt blew past USD 36 trillion recently, a six-fold increase in the 21st century alone. It’s now more than 120 per cent of the country’s gross domestic product.

The US government incurs debt when it issues treasury securities to fund the deficit between the amount of money that it receives in taxes and other revenues versus the amount of money that it spends on defence, welfare programmes, interests, and more. As of January 23, 2025, the government’s total debt was USD 36.22 trillion. The Bureau of the Fiscal Service classifies national debt as intergovernmental debt and debt held by the public. About four-fifth of the total national debt is public debt. As of Jan. 23, 2025, USD 28.88 trillion of the national debt is held by the public.

Experts fear that despite DOGE, Trump’s agenda calls for adding trillions of dollars to US debt. Trump’s tax and spending priorities would increase red ink, even as he boasts of balancing the budget.

Japan is the largest foreign holder of public US government debt, owning USD 1.09 billion in debt and China takes the second spot behind Japan among foreign holders of US debt with USD 768.6 billion in Treasury holdings as of November 2024. Japan and China together account for 21.6 per cent share of foreign-owned US debt. Japan—a long trusted ally of the USA—is an active member of China initiated Regional Comprehensive Economic Partnership (RCEP) which India decided to opt out of in 2019. India was involved in the initial negotiations for the RCEP, but concerns about trade imbalances and impact on domestic industries led to its withdrawal.

BRICS: an emerging threat to USA’s hegemony

BRICS (acronym for Brazil, Russia, India, China and South Africa) held its first summit following the group’s expansion on January 1, 2024, from October 22 to 24 in Kazan (Russia) under Russia’s presidency. With more than 30 delegations, 22 heads of state or government and several representatives of international organisations including United Nations (UN) attending, the summit was a diplomatic success for Russia. It offered President Vladimir Putin the opportunity to demonstrate to the world that Russia is not isolated. For the first time, a NATO member, Türkiye, attended the summit, and applied to join BRICS. The meeting in Kazan underlined BRICS’s ambition to foster relations with the Global South, and its aim of shaping an alternative multipolar world order, particularly in the global financial and trade system, observed the European Parliament.

The BRICS countries overtook the G7 countries share of the world’s total gross domestic product (GDP) in terms of purchasing power parity (PPP) in 2018. By 2024, the difference had increased even further. The BRICS is now holding a total 35 per cent of the world’s GDP compared to 30 per cent held by the G7 countries.

Foreseeing BRICS as a possible threat to the USA’s hegemony in the world’s power structure, the US President is targeting India – the weakest link in the BRICS chain – to create a division in the China-led global alliance.

Apprehending Trump’s aggression, India retreated by saying that it has no plans for de-dollarisation. The Reserve Bank of India responded to Trump’s threat to impose a 100 per cent tariff on BRICS nations planning to have a common currency, saying “No decision has been taken in the matter”.

Modi-Trump meeting

In the second week of February, the Indian Prime Minister Narendra Modi visited the USA and met with President Donald Trump on an ‘Official Working Visit’ in Washington, DC on February 13, 2025. Before leaving for the USA, the Modi government made a number of policy announcements to please the Trump administration. In addition to reducing import duties on many US exports, the Finance Minister announced plans to amend the Atomic Energy Act and the Civil Liability for Nuclear Damage Act (CLNDA), while presenting the Union Budget 2025. These amendments are part of a broader strategy to expand India’s nuclear energy capacity to 100 GW by 2047.

India-US Joint Statement (February 13, 2025), released by the Ministry of External Affairs, mentions a new initiative – the “US-India COMPACT (Catalysing Opportunities for Military Partnership, Accelerated Commerce & Technology) for the 21st Century” – to drive transformative change across key pillars of cooperation. Under this initiative, they committed to a results-driven agenda with initial outcomes this year to demonstrate the level of trust for a mutually beneficial partnership. The discussion between the two leaders broadly covered issues pertaining to defence, trade and investment, energy security, technology and innovation, multilateral cooperation, and people-to-people co-operation.

In their talks at the White House, the two leaders decided to significantly expand energy cooperation. They vowed to move forward with facilitating the construction of American-designed nuclear reactors in India under the framework of the epochal civil nuclear deal sealed by the two nations over sixteen years ago. It was stated that the two sides further decided to establish bilateral arrangements in accordance with CLNDA that would address the issue of civil liability and facilitate collaboration between Indian and US industries in the production and deployment of nuclear reactors.

It is reported that Prime Minister Narendra Modi, during a joint briefing with President Donald Trump, spoke about India’s vision of ‘Make India Great Again’ (MIGA)—a phrase inspired by Mr. Trump’s signature slogan ‘Make America Great Again’ (MAGA). According to PM Modi, a joint vision of ‘MAGA’ and ‘MIGA’ becomes a “MEGA partnership for prosperity.” President Trump took note of this emotive description of strong Indo-US relations and offered to sell F-35 fighters to India, which defence analysts and Indian opposition parties consider a white elephant due to its high price and massive operational expenses. Earlier, Trump’s ally Elon Musk had described the F-35 as “junk.”

In the area of trade and investment, the leaders launched “Mission 500,” aiming to more than double total two-way trade to USD 500 billion by 2030. They also announced plans to negotiate the first tranche of a mutually beneficial multi-sector bilateral trade agreement by the fall of 2025. This will include themes such as increasing market access, reducing tariff and non-tariff barriers, and deepening supply chain integration between the two countries.

It was also agreed that India will host the Quad summit later this year, and the Prime Minister has extended an invitation to President Trump for the event. The two leaders agreed to convene partners under the IMEC (India-Middle-East-Europe Corridor) initiative as well as the I2U2 construct—a strategic partnership between India, Israel, the United Arab Emirates (UAE), and the United States—within the next six months to announce new initiatives. They also launched the Indian Ocean Strategic Venture, a new bilateral forum to advance coordinated investments in connectivity and commerce in this region.

Apparently, the Modi-Trump meeting has not achieved any significant gains. The second and third flights carrying hundreds of Indian illegal migrants, in chains, deported from the US, have landed in India. It is also reported that a group of Indians, part of a larger group of 299 migrants sent to Panama by the US government, has been moved from a hotel in the capital to the Darién jungle region in the south of the country.

Shares of Adani Enterprises declined sharply after the US Securities and Exchange Commission (SEC) told a federal judge that its efforts to serve its complaint on Gautam Adani and Sagar Adani in an alleged bribery scheme are “ongoing,” including through a request for assistance from Indian authorities. India’s benchmark indexes fell for the fourth straight session, recording weekly losses, weighed down by auto and pharma stocks due to uncertainty over the impact of US trade policy. Pharma stocks have lost 2.1 per cent this week after President Donald Trump said he intends to impose at least 25 per cent tariffs on the sector. The US accounts for nearly 31 per cent of India’s total pharma exports. Depreciation of the Indian rupee against the US dollar continues.

Days after Tesla started hiring staff in India, signalling its potential entry into the market, US President Donald Trump stated that any potential plans by the EV maker to build a factory in India to circumvent that country’s tariffs would be “very unfair.” Tesla, which was expected to make its debut in India later this April, is reportedly planning to import vehicles from its German facility rather than China. The Musk-led company will likely seek benefits under the new EV policy announced in March 2024, which permits the import of 8,000 vehicles yearly at a 15 per cent customs duty (reduced from 110 per cent), provided the company invests USD 500 million in local manufacturing along with meeting domestic value addition requirements. It is now reported that Tesla will commence its India rollout in the next couple of months with imported EVs and is unlikely to have any local manufacturing component initially. Instead, the government may seek to integrate India into Tesla’s global value chain.

A few concerns

India’s energy ties with the US may upset Russia, which has been a major energy supplier to India, offering lower prices, especially since 2022. US oil and gas are usually more expensive for India than those from Russia or other countries like Qatar and Australia.

According to McKinsey & Company’s research on shifting patterns of global trade, India is becoming increasingly dependent on upstream imports from China for goods that are then exported to markets such as the US and Europe. At the same time, India’s exports to China are declining, suggesting an emerging asymmetrical trade relationship between the world’s two largest developing economies. How India’s big neighbour, China, reacts to this development with the US remains to be observed closely.

History reveals that the US is not a reliable ally, as it abandons its partners whenever it wishes. Recent developments with Ukraine are a case in point. Now, the US is siding with Russia. Earlier, it had ditched Canada and Mexico—despite establishing the North American Free Trade Agreement (NAFTA) with them. The US also betrayed Afghanistan and Pakistan, who were its allies a decade ago. India must recall the political history of the US before considering it a trusted ally.

Views expressed are personal