Say Goodbye, It’s Liberation Day: India’s Choice

By nature of its size, Canada is inevitably affected by disputes between larger nations. This may be beyond Canada’s control, but we must be sensitive to potential outcomes.
US tariffs on India are among the most punitive levied against any country in the world. Their impact on the Indian economy is potentially catastrophic.
The usually positive relationship between India and the United States appears to have completely unravelled.
Indian Prime Minister Narendra Modi has taken a renewed interest in the China-led Shanghai Cooperative Organization (SCO). He recently attended the SCO Summit in Tianjin, China, where he engaged in talks and affectionate photo ops with Xi Jinping and Vladimir Putin.
If India gives up on its Western alliances and pivots fully to SCO, the geopolitical consequences for Asia will be profound.
As a full participant in SCO, India would be emboldened to increase its foreign interference activities against Canada, including espionage, intimidation and targeting of Canadian business and critical infrastructure.

America and its Tariffs

As the full US tariff regime takes hold, it is increasingly clear that it has far less to do with strengthening the domestic economy than it does with punishing behaviour that Washington sees as inimical to its own interests, or even the personal interests of President Trump.

Here in Canada, the government’s announcement that it would (conditionally) recognize a Palestinian state caused the US President to post on social media: “That will make it hard for us to make a Trade Deal with them. Oh Canada!!!” Canada currently faces 35% tariffs on goods not covered under the Canada-US-Mexico Agreement (CUSMA).

Punishing Brazil

While the whipsawing US tariff regime has been difficult for Canada, for many countries it is potentially catastrophic. In the case of Brazil, for example, the US administration claimed that the United States is in a trade deficit, when in fact it runs a surplus, exporting far more in 2024 ($78.4 billion) to the South American country than it imports ($49 billion).

But it goes further. By the president’s own admission, cross the board US tariffs of 50% on Brazilian goods are retaliation for the prosecution of his friend, former Brazilian president Jair Bolsonaro, who attempted a coup after losing the 2022 presidential election to current president, Luiz Inácio Lula da Silva. Trump has characterized the proceedings against Bolsonaro as a “witch hunt” and seems to see the tariffs primarily as a means of bringing the Lula government to heel.

Manipulating India

Apart from Brazil, the only other country in the world facing US tariffs of 50% is India. In 2024, India reported a trade surplus with the United States, exporting more than $87 billion dollars’ worth of goods and importing less than $42 billion worth of American goods. In late August of 2025, the United States upped total tariffs on Indian imports from 25% to 50%. As with Brazil, however, this appeared to be more about punishment than corrective economic policy. American officials claimed that the tariff increase was a response to India’s continued imports of Russian oil, which the US administration says are funding Russia’s war against Ukraine.

Again, it goes further. In the weeks leading up to the tariff announcement, President Trump had been casting himself in the role of mediator between India and Pakistan, particularly with regard to a de-escalation of military hostilities between the two nuclear-armed states after an April 2025 attack by suspected Pakistan-based Lashkar-e-Taiba militants in Kashmir. According to both Indian and US officials, Trump allegedly took credit for the de-escalation with Pakistan in a June conversation with Indian Prime Minister Narendra Modi, adding that Pakistan would be nominating him for a Nobel Peace Prize in recognition of his achievement. Modi replied that India and Pakistan had settled the matter between themselves, with no US assistance and, perhaps more importantly, refused to discuss the supposed Nobel nomination. Since then, there has been no communication between the two leaders.

Modi and His Base

Clearly, there is a lot more at play here than just political egos. As discussed in previous CIBs, Prime Minister Modi has cast himself in the role of a Hindu nationalist strongman. Much of that is based on his willingness and his ability to take on the Muslim-majority Islamic Republic of Pakistan. So, acknowledging that the United States had played any role in defusing an extremely dangerous situation in Kashmir could seem like an admission of weakness, particularly to Modi’s Hindu nationalist base.

America, Offshoring, and Reshoring

From an American perspective, meanwhile, the trade deficit with India seems like a problem, especially given that some of India’s largest exports to the United States – pharmaceuticals, electronics, iron, and steel – are commodities that the US administration has pledged to “reshore” to American manufacturers (it is worth noting that one of Canada’s most venerable steel companies – Dofasco – is now a subsidiary of ArcelorMittal, a transnational steel manufacturing corporation that originated in India). But, again, in the current geopolitical environment, it is difficult to parse the difference between the personal and the political.

Mr. Modi Goes to Tianjin

On August 31, Prime Minister Modi travelled to China to attend 2025 Summit of the Shanghai Cooperation Organization (SCO), an “alternate” Eurasian security bloc that includes China, Russia, Belarus, Iran, Pakistan and India. He met with Chinese President Xi Jinping, Russian President Vladimir Putin, and senior officials from Iran and Pakistan. This is Modi’s first visit to China in seven years and its timing, coming so soon after his apparent rift with his erstwhile American ally and supporter, and the imposition of crippling US tariffs on Indian imports, is highly symbolic…and perhaps significant.

Over the course of the meeting, both Modi and Xi characterized the importance of the China – India trade relationship and seemed willing to put aside some critical problems between the two countries, notably the long festering Indo-Chinese border dispute in the Himalayas, and the huge Indian trade deficit with China.

Xi, Putin and the SCO

While no substantive agreement came out of the meeting, its real importance, as above, lay in its signals. Modi demonstrated his independence from the United States and his apparent willingness to listen to what Xi, Putin and the SCO have to say (Modi allegedly spent an hour speaking one on one with Vladimir Putin in the privacy of the Russian president’s official limousine). Xi showed off his chops as a global force to be reckoned with, wooing the world’s most populous country (almost one in five of the earth’s people live in India). And in keeping with Xi’s vision of the SCO as an “alternative order” for the Global South, the potential of a renewed role for India in the SCO lends real heft to an organization that has long been dismissed as a cabal of global bad actors.

India: Between East and West

Ever since the 1950s, when it was one of the leaders of the so-called “Non-Aligned Movement,” India has been highly adept at navigating the fraught geopolitical space between superpowers, especially – and at various times - the United States, the Soviet Union, Russia, and China. More recently, India has been one of the pillars of the Quadrilateral Security Dialogue (Quad), along with Japan, Australia, and the United States. With its “shared vision for a region that is governed by accepted rules and norms,” the Quad is clearly intended to offset the influence of China in South and East Asia. In the aftermath of the imposition of US tariffs and India’s apparent pivot towards the SCO, however, Trump has announced that he will not attend the annual Quad summit, leaving the future of the organization, one of the most important challenges to Chinese hegemony in Asia, in some doubt.

While it remains to be seen whether Modi will truly embrace the SCO, there are many factors at play here, including Modi’s pride and India’s continuing ability to balance competing powers and interests. Despite its membership in the Quad, for example, India is an important client of Russia’s defence industry, having purchased more than $60 billion worth of Russian weapons since the turn of the century. And that’s to say nothing of the cheap Russian oil that lies at the heart of the US-India dispute. The other important factor, of course, is whether the American president will continue to act as a global disruptor, effectively tearing up long-standing alliances and agreements. India may feel that it has little choice but to embrace the SCO.

Why We Care

If India, China and Russia are indeed able to work out a true modus vivendi and India does become a fully participating member of the SCO, it would be a global gamechanger. America would risk losing (and may already have lost) one of its most important allies in Asia. And through a combination of geography and population, the three countries could effectively dominate the entire continent, with only Japan and Australia left as Western allies of any significance, clinging to the Asian periphery.

From a Canadian security perspective, an India more closely allied with countries like China and Russia (and Iran), would represent a significantly greater threat than it does already. Emboldened by an association with nations that routinely resort to foreign interference, intimidation and espionage, India would undoubtedly lose any compunctions or scruples it might currently have around targeting Canada, a country that it clearly sees as a first order challenge. Apart from Canadian residents and Canadian politicians India views as problematic, such targeting could also include Canadian business and critical infrastructure. To borrow from another American president, Lyndon B. Johnson, no matter how distasteful Modi and his policies may be, surely it is better to have him inside the tent pissing out, than outside the tent pissing in.

This assessment was completed using information current as of 1600 EDT, 2025-09-03