Trump’s tariff, penalties cast shadow on India-US tech collaboration

US President Donald Trump’s threat of 25 per cent tariff and further ‘penalties’ on India  have cast a shadow on the US-promised collaboration and joint ventures on technology.

A part of India’s present-day and future technology needs, across sectors, are intertwined with the US — from engines for fighter jets to semi-conductors and from artificial intelligence (AI) to pharmaceuticals.

On Wednesday, Trump announced the tariff and also imposed an unspecified level of penalties on India for buying Russian oil and weapons. This turnaround comes within months of a bilateral meeting between Prime Minister Narendra Modi and Trump that promised multiple things. In February, the Modi-Trump meet was followed by a seven-page-long joint statement that spoke about cooperation in defence, trade and investment, energy security, technology and innovation and multilateral cooperation.

The two also announced the launch of the US-India TRUST–that is ‘transforming the relationship utilising strategic technology’. This was an upgrade over the Initiative on Critical and Emerging Technology (iCET) launched in January 2023. The first track 1.5 meeting on ‘TRUST’ was held in India in March.

Some of the India-US cooperation in technology is at present at a crucial stage like engines for fighter jets. US company General Electric is supplying the F-404 engines for the Tejas Mark 1A fighter jet. However, the bigger deal is the US promise for technology transfer and a joint venture to produce in India the F-414 engine, much superior to the F-404 engine. It would define the trajectory of India’s strategic reliance over the next 4-5 decades as some 800-Plus engines are expected to be made.

Another area is semi-conductors. In March 2023, India-US signed a Memorandum of Understanding (MoU) on the semiconductor supply chain and innovation partnership. This laid groundwork for a collaborative mechanism which aligned the goals of the US CHIPS and Science Act and India's comprehensive Semiconductor Mission.

Substantial investments from leading US semiconductor companies in India have been made. Micron Technology has set up a state-of-the-art semiconductor assembly and test facility in Sanand, Gujarat. Applied Materials, a leader in materials engineering solutions, has started its phased $2 billion investment to create hundreds of advanced engineering jobs.

Lam Research, which makes tools for semi-conductor manufacturing, has announced a $1.2-billion investment in India.

As a pillar of the TRUST initiative, Trump and Modi put forward a US-India roadmap on accelerating AI infrastructure. This is scheduled to be created in the current calendar year. This looks at industry partnerships and investments in next generation data centres with access to processors for AI. Work on the roadmap already started, when Vice President JD Vance, during his  visit to India in April, mentioned it.

The roadmap is to be clearly articulated by the time India hosts the Quad Leaders’ Summit in the last quarter of 2025. After last night’s actions of Trump, the Quad summit could be icy, said a senior functionary.

On pharmaceuticals, India and the US are looking to provide an alternate to China that provides the largest volume of active pharmaceutical ingredients (APIs). The US is looking at investments from Indian pharmaceutical companies into the United States. Discussions on these have started.

Apart from this, India is part of the US-led initiative on critical minerals – a key raw material for making electronics, electric vehicles, laptops, TV sets etc.