“Politics increasingly trumps economics. Decisions are now being made not merely on cost, but on ownership and security…Faced with such pulls and pressures of globalisation, fragmentation and supply insecurity, the rest of the world responds by hedging against all contingencies. Even as it engages the US and China directly, choices are avoided where feasible and choices are made when beneficial.”
With these remarks in Kolkata on November 29, External Affairs Minister Dr S Jaishankar offered perhaps the clearest articulation of the international churn that defined India’s diplomacy in 2025.
The year was marked by fractured alliances, revived power politics, punitive tariffs and the sobering realisation that even strategic partnerships have hard limits.
The EAM warned that the world was growing “less rule-bound and more fragmented”, where the US, which has long been the underwriter of the global order, was setting “radically new terms of engagement”, even as China continued to play by its own rules. For India, the year proved how real these shifts are, not just across negotiating tables, but during moments of acute security stress.
The most jarring diplomatic moment of 2025 unfolded during Operation Sindoor, when India launched calibrated military action in response to Pakistan-sponsored terror escalation. While New Delhi maintained that its actions were precise, proportionate and non-escalatory, the crisis exposed the limits of strategic convergence with Washington.
The US publicly positioned itself as a crisis manager, with US President Donald Trump first announcing a ceasefire between the two nuclear-armed neighbours and later repeatedly claiming that his administration had “stopped a war” between India and Pakistan. Trump’s remarks were privately viewed in New Delhi as diplomatically unhelpful and strategically misplaced.
Discomfort deepened when Trump hosted Pakistan Army chief Field Marshal Asif Munir at the White House, a move seen in New Delhi as a clear signal that Washington was once again prepared to re-engage Rawalpindi even as it remained on India’s list of principal sponsors of cross-border terrorism.
India made it clear that it neither sought nor accepted any third-party mediation, and all communication during the five-day skirmish with Pakistan remained strictly bilateral. However, the episode revived long-standing concerns in New Delhi about the US tendency to balance India and Pakistan during times of crisis.
Tariffs, ties with US
Meanwhile, trade disputes tested the economic foundation of the India-US relationship in 2025 as the year saw the Trump administration impose punitive tariffs of up to 50 per cent on a wide range of Indian exports, citing trade imbalances and domestic considerations.
The measures included an additional 25 per cent levy linked to India’s continued purchases of Russian oil, a move that New Delhi viewed as an attempt to use trade policy to enforce geopolitical alignment.
India strongly pushed back, describing the tariffs as “unfair, unjustified and unreasonable”, and warned that such unilateral actions risked disrupting supply chains and hurting labour-intensive sectors at a time of global economic uncertainty.
Yet, even as the tariff war intensified, Trump repeatedly described Prime Minister Narendra Modi as his “true friend”, underscoring the paradox that came to define ties in 2025 — sharp economic friction running alongside sustained political outreach. Negotiations for a bilateral trade agreement between the US and India continued through the year, although progress remained uneven.
Commerce and Industry Minister Piyush Goyal recently said talks with the US had reached an advanced stage, noting that Washington viewed New Delhi as a “trusted partner”. He maintained that strategic and economic cooperation between the two countries continued to broaden despite volatility in global trade and politics.
H-1B visa fee shock
Trade frictions were compounded by a sweeping shift in the US immigration policy that sent ripples through India’s technology and professional workforce.
In September, the US President imposed an annual fee of $1,00,000 on H-1B visas, a dramatic increase from the earlier charge of around $2,000. The proclamation, signed on September 20, was described as one of the most consequential changes to the US immigration system in the recent years.
The order labelled the alleged H-1B visa abuse a “national security threat”, citing concerns over fraud, money laundering and organised crime involving outsourcing firms. The move was widely seen as part of a broader effort to restrict foreign labour and prioritise domestic employment.
The fee hike had an immediate and significant impact on India as Indian nationals account for nearly three-fourth of all H-1B visas issued, making the programme a critical pathway for Indian technology professionals, engineers and researchers. The steep fee hike has since emerged as a major barrier to entry, forcing companies and workers to reassess hiring plans, relocation decisions and long-term career strategies.
India’s Ministry of External Affairs said both Indian and American industries had a shared stake in innovation, competitiveness and talent mobility, and indicated that consultations between stakeholders were expected to address the implications of the policy change.
Strategic autonomy reinforced
Rather than narrowing its diplomatic options, India responded by doubling down on strategic autonomy.
The year saw New Delhi accelerate trade diversification through a flurry of agreements — including landmark free trade pacts with the UK, Oman and New Zealand, deeper economic engagement with Europe, and strengthened partnerships across West Asia and the Indo-Pacific. These moves were not merely commercial; they were strategic hedges against a volatile and increasingly politicised global trade environment.
Across regions — from Africa and Latin America to the Middle East — India expanded its diplomatic footprint, aligning partnerships around supply-chain resilience, technology cooperation, connectivity and talent mobility. The emphasis mirrored Jaishankar’s assessment that globalisation was not retreating, but mutating, with security and economics now inseparably intertwined.
Calibrated thaw with China
Even as the US hardened its tariff posture, India sustained cautious engagement with China without diluting its position on border security, while maintaining robust ties with Russia, particularly in energy and defence, despite intensifying geopolitical fault lines.
PM Modi attended the SCO Summit in Tianjin (China), where he held bilateral talks with Chinese President Xi Jinping. Xi stressed that the two Asian neighbours must ensure “peace and tranquillity” along the border and should not allow boundary disputes to define the broader relationship.
In a subsequent interview with a Japanese newspaper, Modi underlined that stable India-China ties were crucial not only for regional peace but also for global economic stability. “Stable, predictable and amicable bilateral relations between India and China… can have a positive impact on regional and global peace and prosperity,” he said, adding that both countries must work together to bring stability to the world economic order amid global volatility.
Significantly, the Tianjin Declaration adopted at the SCO Summit delivered a united condemnation of the Pahalgam massacre, in which 26 people were killed by Pakistan-based terrorists. The strong wording — adopted with Modi, Xi, Russian President Vladimir Putin and Pakistan PM Shehbaz Sharif at the table — underscored the diplomatic weight of the message.
India and China also agreed to resume direct air services from October 26, marking a major step towards normalising ties. The overall pattern of 2025 remained one of cautious engagement layered over firm deterrence — dialogue without dilution of red lines.
Reset with Canada
Another notable diplomatic shift came in ties with Canada. After nearly two years of acrimony marked by accusations, expulsions and frozen channels, relations began to stabilise following a change in the government in Ottawa.
Canada PM Mark Carney, who assumed office in early 2025, signalled a pragmatic reset focused on economic engagement. The political opening allowed both sides to move from confrontation towards managed rapprochement.
India is now set to launch discussions on the terms of reference for a trade agreement with Canada.
Last month, Modi and Carney agreed to restart negotiations on a high-ambition Comprehensive Economic Partnership Agreement (CEPA), setting a target of doubling bilateral trade to $50 billion by 2030. Officials said the expanding trade architecture with Five Eyes partners reflected growing convergence across economic, strategic and technological domains.
Managing uncertainty sans illusions only way forward
As India looks ahead at 2026, the lessons from 2025 are unmistakable. The challenge will lie in stabilising ties with the United States, without strategic illusions, navigating great-power competition without entanglement, and sustaining economic growth amid tariff volatility and geopolitical risk.
Operation Sindoor has reaffirmed that national security remains non-negotiable, even when it complicates partnerships. On the other hand, trade disputes underscored that economic convergence cannot be assumed, while global fragmentation reinforced the logic of multi-alignment over dependence.
In many ways, Jaishankar’s November speech was less a diagnosis than a roadmap — advance national power, reduce vulnerabilities and expand influence in a world where certainty is scarce, but choices are unavoidable.
From January 1, 2026, India will also assume the BRICS presidency, stepping into a larger leadership role in a rapidly evolving multipolar order.
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