India elites have been dealt with the most brutal geopolitical lesson in Trump’s red carpet accommodation of Xi Jinping’s China. Will this finally teach them the right lesson?
For the better part of the last nearly two decades, the Indian strategic establishment has operated under a comforting delusion: that the structural rivalry between the United States and China would serve as an escalator for India’s geopolitical rise. The calculus was remarkably convenient. As Washington and Beijing engaged in a protracted trade and technological war, New Delhi believed it could simply position itself as the indispensable swing state, sweeping up the manufacturing exodus of the “China+1” strategy while leveraging Western anxieties to secure its own security and economic interests.
It was a strategy built on outsourcing the material needs of India’s growth to the friction between two greater powers. Today, that grand illusion lies in ruins. The recent geopolitical realignments under the Trump administration—most notably a stark, transactional accommodation of Xi Jinping’s China combined with a punitive stance toward New Delhi—have delivered a brutal wake-up call.
The era of relying on “soft power,” diplomatic suppleness, and the sheer luck of global geopolitics is over. India is learning the hard way that a nation cannot outsource its its sovereignty with the hollow armour of cultural diplomacy. On September 24, the White House put on an elaborate state visit for Xi Jinping, with military fanfare and a lavish banquet. The pageantry had a purpose.
Treasury Secretary Scott Bessent announced that the temporary trade truce, which lowered US tariffs and suspended Beijing’s controls on rare earth and critical mineral exports, would be extended by two months to January 10. Beijing got the extension even though, by Bessent’s own account, China was lagging on its pledge to buy $17 billion in other agricultural goods, and US officials said rareearth deliveries were also falling short. China missed its commitments and was rewarded. India kept its commitments and was punished. That is the unkindest cut, and New Delhi should study it closely.
WHAT INDIA PAID, AND WHAT IT GOT
Recall the sequence. Through the second half of 2025, Indian goods faced a 50% tariff, the highest applied to any major partner, partly as punishment for buying Russian oil. In February 2026, New Delhi agreed to terms. President Trump removed the additional 25% tariff in recognition of India’s commitment to stop purchasing Russian oil. India also said it intends to buy over $500 billion of US energy, information and communication technology, coal, and other products.
India made concessions on energy security, a core national interest, and the promised relief was then undercut by American courts. After the US Supreme Court invalidated the reciprocal tariffs, Washington issued executive orders imposing 10% tariffs on certain products from all countries. The ruling removed the leverage the administration had used to conclude its Framework Agreement with India. Momentum has slowed while both sides wait on pending investigations and possible new Section 301 cases. Seven months later, Commerce Minister Piyush Goyal says India will finalise the deal only when Washington offers tariff terms that beat competitors like Vietnam and Bangladesh. India has already given up its bargaining chips and is now is asking for favours.
Compare Taiwan, Washington’s most strategically important partner in Asia. After the May summit in Beijing, the United States paused a record $14 billion arms package to Taiwan, and Trump described arms sales to Taipei as a “very good negotiating chip” with China. This breaks with past US practice, including in Trump’s own first term, of keeping Taiwan’s defence separate from broader China policy.
If Taiwan’s security can be traded, so can every assumption Indian strategists have made since 2005 about American interest in a strong India as a counterweight to China. Washington has not betrayed India. It has done what great powers always do: it accommodates leverage and ignores sentiment.
WHY CHINA HAS LEVERAGE AND INDIA DOES NOT
China’s leverage is material. It makes things the world cannot do without and has shown it will withhold them. India is one of the most exposed economies to this. India’s trade deficit with China reached a record $112.6 billion in FY2025-26. Imports rose 16% to $131.63 billion, while exports, despite growing 37%, reached only $19.47 billion. The Commerce Ministry has told Parliament that the deficit comes mainly from raw materials, intermediate goods and capital goods: auto components, electronic parts, mobile phone parts, machinery, and active pharmaceutical ingredients. In other words, much of India’s export success is assembled on a Chinese foundation. Rare earths show the problem most clearly. In FY2024-25, India imported close to 54,000 tonnes of rare earth permanent magnets, 93% of them from China.
In April 2025, China imposed export licensing on seven heavy rare earths that India’s defence manufacturers depend on, including the dysprosium and terbium used in magnets for missile guidance, radar and fighter aircraft. India’s usable stockpile of defence-critical magnets is two to three weeks. A country that cannot build its own missile guidance systems without Beijing’s approval cannot claim full strategic autonomy. The policy response is real but small. The Rs 7,280 crore magnet programme targets 6,000 tonnes a year of capacity against projected 2030 demand of 8,220 tonnes. Worse, the tender shows the new plants will run largely on oxide refined in China, so dependence is being moved one step up the supply chain rather than removed.
THE DEEPER DEFICIT
Behind the trade numbers is a failure of national priorities. According to the Economic Survey 2025-26, India’s gross expenditure on R&D is 0.64% of GDP, against 3.48% for the US, 2.43% for China and 4.91% for South Korea. Indian business accounts for only 41% of that spending, compared with 77% in China and 79% in South Korea. Indian companies have profited from assembly, trading and services. They have largely not invested in capability.
The manufacturing figures are just as clear. Manufacturing’s share of India’s GDP fell from about 16% in 2015 to nearly 13% in 2024, despite a decade of Make in India and production-linked incentives. China and South Korea have kept manufacturing at around 25-27% of GDP. India’s share of global manufacturing exports is still only about 1.7%.
THE COMFORTING MYTHS
For two decades, Indian elites have reassured themselves with a set of ideas. India is “supple, not strong,” able to use agility where it lacks mass. Soft power will produce influence. As the world’s “swing state,” India will be courted by everyone and can partner with all without choosing sides.
Each idea contains some truth, but none is a strategy. Suppleness means little when your counterpart can cut off your magnets in three weeks. Soft power is a result of hard power, not a replacement for it. The world admired Japanese culture after Japan built Sony and Toyota. The “swing state” idea assumes the great powers compete for India. The Trump-Xi summits show they will negotiate over India’s head when their own interests call for it. Strategic autonomy without material autonomy is only a phrase.
THE RIGHT LESSON
The wrong lesson would be to resent Washington, lean toward Beijing, or return to non-aligned posturing. The right lesson is harsher and simpler: nobody will supply the material basis of India’s rise. India has to build it. India has made real gains, including the EU and UK trade agreements and exports to China up 37%.
That means treating R&D spending of 2% of GDP as a national security goal, not an aspiration, and pushing Indian business to fund it. It means building the whole rare earth chain, from mining to oxide to magnet, with partners such as Japan, Australia and the EU, and maintaining stockpiles measured in months, not weeks.
It means treating active pharmaceutical ingredients, electronic components and machine tools with the same seriousness India once gave to food security and nuclear deterrence. And it means ending the habit of confusing diplomatic attention with strategic weight. China got a red carpet because it has leverage. India will get one when it has leverage too. The sooner the establishment in New Delhi accepts this, the less the lesson will cost.
* Hindol Sengupta is professor of international relations at O.P. Jindal Global University.
