Inside India newsletter: Trump-Xi meeting could test India’s positioning as China counterweight

Hello, this is Priyanka Salve, writing to you from Singapore.

Welcome to the latest edition of "Inside India" — your one-stop destination for stories and developments from the world's fastest-growing large economy.

For more than two decades, consecutive U.S. administrations have seen India as a counterbalance to China's growing influence in the Indo-Pacific. But the current U.S administration's stances seem to favour Beijing while punishing India. This week, I unpack how the U.S.-China summit could impact New Delhi's equation with Washington.

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The big story

India, whose significance to the U.S. foreign policy has been shaped by frictions between Washington and Beijing, will be keeping a close eye on the meeting between President Donald Trump and his Chinese counterpart, Xi Jinping.

When the summit between the world's top two economies begins later in the day, India will be hoping that Trump's softening stance toward China does not lead to a bargain that diminishes New Delhi's role in the Indo-Pacific, experts said.

If Trump prioritizes a bilateral grand bargain with Beijing, India will have "reasonable concerns that the United States will treat China as the central negotiating partner in Asia rather than as the central strategic challenge," Ronak D. Desai, visiting fellow at the Hoover Institution, Stanford University, told CNBC.

Therefore, "India will need to make its strategic value harder to overlook," Desai said, adding this would mean the U.S.-India relationship must lead to more tangible outcomes in sectors like defense, maritime security, critical minerals, energy, and manufacturing.

Trump and Xi last met in Busan, South Korea, in November, where the U.S. president called Xi "a very tough negotiator," and said that the two sides had "always had a very good relationship." Meanwhile, Xi urges Beijing and Washington to be "partners and friends." It was during this meeting that Trump also referred to China and the U.S. as G2.

"He [Trump] favors strong-armed leaders," Nirupama Rao, former Indian ambassador to the U.S., China, and Sri Lanka, told CNBC's "Inside India" on Monday, hinting at Trump's conciliatory stance toward Xi in the recent past.

Shift in U.S. foreign policy

For more than two decades, consecutive U.S. administrations have deepened ties with India as a measure to counterbalance China's influence in the Indo-Pacific. India, being the world's largest democracy, as opposed to China's one-party government, is seen as a natural partner to the U.S., experts said.

"It was Trump who, in his first term, had challenged America's China policy and even gave impetus to QUAD," said Harsh Pant, vice president of studies and foreign policy at the Observer Research Foundation. QUAD is a diplomatic partnership between Australia, India, Japan, and the United States that aims for a "peaceful, stable, and prosperous Indo-Pacific."

Trade tensions between China and the U.S., which escalated during Trump's first term, also made India one of the many beneficiaries of the China+1 policy, as U.S. firms started to diversify their supply chains away from Beijing.

But during Trump's second term, there has been a shift in the U.S. foreign policy, with Washington and New Delhi's relations getting frayed over trade and tariffs. The U.S. president even warned Apple not to build smartphones in India as he pursues his "America First" agenda.

"The narrative of India as a counterbalance to China has weakened under the Trump administration," said Chietigj Bajpaee, senior research fellow for South Asia at Chatham House, adding that Trump's foreign policy during the second term has been more transactional and less value-driven.

India-U.S. relations suffered a major jolt last year, after Washington accused New Delhi of profiteering from cheap Russian oil and levied 25% in penalty tariffs, while looking past China's Russian oil purchases.

Following the Xi-Trump meeting in Busan last year, Washington also cut tariffs on Chinese goods to around 47%, lower than the 50% that it was charging on imported Indian goods, before reducing them earlier this year.

"The [Trump] second administration started on a very hawkish note when it came to China, only to quickly realize that it did not have suitable substitutes for Chinese components necessary for US companies and consumers," said Aryan D'Rozario, associate fellow, chair on India and emerging Asia economics at CSIS. That led to a softening of the stance against Beijing.

While U.S.-India ties soured as Trump pursued his transactional foreign policy, Beijing and New Delhi have been embroiled in border disputes for decades and relations have been fraught with tensions. Against that backdrop, India will be watching the outcome of the U.S.-China summit more closely than most Asian countries.

"From New Delhi's perspective, it will be looking at the Trump-Xi meeting with a degree of trepidation amid concerns about the revival of a so-called 'G2' concept, which marginalizes middle-powers like India," Bajpaee said.

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**Coming up **

May 14-15: India to host BRICS Foreign Ministers' meeting.

May 15-20: PM Modi to visit the UAE, the Netherlands, Sweden, Norway, and Italy.