From Tariffs to F-35: The India-US Strategic Rift

Abstract

Introduction

The strategic cooperation between the United States and India has established itself as a foundational element for Indo-Pacific relations when addressing China’s expanding power. The partnership between these two nations currently faces deteriorating ties. On July 30, 2025., U.S. President Donald Trump imposed a 25% tariff on Indian products because of India’s tariff policies and defense and energy relationships with Russia. The United States received official notification from India to reject F-35 stealth fighter jet purchases, representing a significant part of Trump’s defence export program. Manufacturing independence precedes defence imports, and the country uses a measured response to trade conflicts. 

Background: The F-35 Offer and U.S.-India Defence Ties:

Lockheed Martin made the F-35 Lightning II, a third-generation stealth multirole fighter jet, and is a fifth-generation stealth fighter jet aircraft with advanced stealth technology, sensor fusion technology, and intelligence production networks. In February 2025, Trump proposed the sale of F-25 jets to India, framing it as a sign of increasing defence cooperation. This was a serious offer, as India was previously out of the list of countries allowed to buy the jets because it depended on Russian military equipment. The F-35 sale was seen as a tool to help the U.S. cut ties between India and Russia and make it more compatible with other Western defense systems.

The Indian Air Force, which currently has just 31 squadrons compared to the approved force of 42, desperately needs to update its fleet to counter the fast-growing military capabilities of China. The F-35 would have enhanced India’s aerial firepower compared to China's 5th-generation fighter, the J-35A. The fact that the jet would be costly, or cost about 80 million dollars per F-35A, as well as Indian officials, was the concerns of Indian officials about the costs involved in operating the plane for 36,000 dollars per flight hour, was a concern for Indian officials. Also, the Indian defence ministry promoted a trend in favour of joint design and production in the country rather than buying off-the-shelf solutions, as the government supports creating entities according to the Make in India program.

The Tariff Row: Catalyst for India’s Decision

Trump’s tariff announcement on July 30, 2025, caught Indian officials off guard, with reports describing New Delhi as “shocked and disappointed”. The 25% tariff, effective August 7, was accompanied by an unspecified “penalty” for India’s trade with Russia, particularly its purchase of Russian oil and weapons. Trump criticised India’s trade policies, calling its tariff “among the highest in the world” and its non-monetary trade barriers “strenuous and obnoxious”. He also expressed frustration over India’s role in the BRICS grouping, which he labelled anti-U.S., and its continued energy import from Russia amid global calls to isolate Moscow over Ukraine.

India’s rejection of the F-35 deal appears to be a strategic response to these pressures. While New Delhi has ruled out immediate retaliation, it is exploring ways to reduce its trade surplus with the U.S., such as increasing imports of natural gas, gold, and communication equipment. However, defence purchases, including the F-35, are explicitly off the table, signalling India’s unwillingness to concede to U.S. demands under tariff threats. This stance underscores India’s commitment to strategic autonomy and reluctance to be drawn into US-Russia geopolitical tensions.

India’s Defence Strategy: Prioritising Self-Reliance:

India’s decision to forego the F-35 aligns with its “Make in India” initiative to increase domestic production and decrease dependence on foreign countries regarding the possession of defence equipment. The Prime Minister Modi regime has taken partnerships related to joint design and manufacturing to the next level, with talks with General Electric and Hindustan Aeronautics Limited on co-manufacturing F414 jet engines still underway. India has set a target of producing fuselages of Rafale planes by 2028, further enhancing its indigenisation targets.

Practical considerations also apply when the F-35 has to be rejected. With the jet’s high cost and maintenance demands, India’s defence budget will be stretched with an expected expenditure of above $200 billion in the next decade to modernise. In addition, India’s air force currently uses a combination of Russian, French, and domestic platforms, so incorporating an extra-complex platform such as the F-35 may stretch the logistics and interoperability. Indian authorities and Air Force commander AP Singh have voiced doubt on F-35, especially its cost of $80 million, and how appropriate it would be for the Indian forces.

Alternative Defence Options: Russia's Su-57 and Beyond

With the F-35 deal off the table, India is exploring alternative fifth-generation fighter options. Russia, India’s long-standing defence partner, has offered to produce its Sukhoi Su-57 stealth fighter locally with Indian-sourced components, potentially starting as early as 2025. This proposal aligns with India’s focus on technology transfer and domestic manufacturing. Russia has historically been India’s primary arms supplier, with its equipment forming the backbone of India’s air, land, and naval forces. The Su-57, while less advanced than the F-35 in stealth capabilities, is a more familiar platform for India’s military, offering logistical advantages and lower costs.

However, a major defence deal with Russia could complicate India’s relations with the U.S., particularly given Trump’s criticism of India’s Russian ties. India’s continued purchase of Russian oil and weapons has already drawn U.S. Scrutiny, and an SU-57 deal could trigger further penalties or sanctions. To mitigate this, India is balancing its options by engaging with other Western partners, such as France for Rafale jets and the U.K. for potential co-production agreements.

Geopolitical and Economic Implications:

India’s rejection of the F-35 deal has broader implications for U.S.-India relations and the Indo-Pacific strategic landscape. The tariff row has exposed vulnerabilities in the bilateral partnership, despite the personal rapport between Trump and Modi. India’s refusal to purchase the F-35 signals a strategic pause in deepening defence alignment with the UUS, potentially weakening the Quad alliance’s cohesion against China.

The 25% tariff economically threatens India’s export-driven sector, such as textiles and pharmaceuticals. The rupee fell 0.4% to 87.7375 per dollar, and the NSE Nifty 50 Index dropped 0.5% following the announcement. Commerce Minister Piyush Goyal has emphasised that India will engage with exporters to assess the tariff’s impact and take “all necessary steps to secure national interest. “India’s commitment to ongoing trade talks, with U.S. negotiators expected in August 2025, suggests a desire to avoid escalation.

India’s pivot toward Russia and other geopolitical partners underscores its commitment to strategic autonomy. India aims to maintain flexibility in a multipolar world by diversifying its defense procurement and strengthening domestic capabilities. However, this approach risks alienating the UUS, which views India as a critical counterweight to China.

Effective seven days after the executive order was issued in July, the updated tariff list adjusts rates on over 80 nations and territories. While India faces a steady 25% levy, Pakistan’s tariff drops from 29% to 19%, and Bangladesh’s plunges from 35% to 20% — following what officials describe as a bilateral deal with Washington.

The move is a part of a broader recalibration under the Trump administration’s “fair trade” agenda, with tariff levels now pegged to existing trade dynamics and perceived market access barriers.

Several key nations saw notable changes:

• Iraq and Serbia were hit with steep 5% rates.
• Laos and Myanmar received the highest tariff at 40%. 
• Syria topped the chart at 41%

The European Union now faces a sliding scale: 0% for goods with the U.S. column 1 duty rates over 15%, and a margin rate for goods under that threshold.

Meanwhile, countries like Brazil (10%), the United Kingdom (10%), and New Zealand (15%) were given more moderate tariffs. India’s unchanged status—and lack of clarity on possible additional penalties tied to its defence ties with Russia—signify continued strain in U.S.-India Relations.

India’s decision to reject the F-34 deal amid Trump’s tariff row reflects a calculated strategy to prioritise self-reliance, strategic autonomy, and economic resilience. By focusing on domestic defence manufacturing and exploring alternatives like Russia’s SU-56, India is navigating a complex geopolitical landscape while addressing its military modernisation needs. The tariff dispute has strained U.S. imports, while avoiding defence concessions, demonstrating its intent to maintain constructive engagement. As India weighs its options, the outcome of ongoing trade and defence negotiations will shape the future of its strategic partnership and its role in the Indo-Pacific.