As 2025 draws to a close, India’s foreign policy has been shaped as much by trade tensions as by geopolitics. The sharp escalation of US tariffs—rising to as much as 50 percent on select Indian goods—emerged as one of the defining challenges of the year, forcing New Delhi to recalibrate its external engagement and place economic diplomacy at the centre of its global strategy.
The tariff shock came at a time of heightened geopolitical uncertainty, with conflicts in West Asia and Europe and political flux in the neighbourhood adding to global volatility. Together, these pressures tested India’s ability to defend strategic autonomy while responding to rising expectations of leadership in a fragmented global order.
Rather than yielding to tariff pressure, New Delhi chose a path of resistance and diversification. India stood its ground in negotiations with Washington even as talks for a bilateral trade deal continued, signalling that market access would not come at the cost of domestic manufacturing or policy sovereignty.
Instead, India accelerated efforts to broaden its trade partnerships. During the year, New Delhi concluded free trade agreements with the UK, the European Free Trade Association and New Zealand, while pushing forward negotiations with the European Union. Policymakers and experts highlighted export diversification—particularly towards Asia, Africa and Latin America—as a key buffer against unilateral trade actions by major economies.
Protecting domestic industry remained a parallel priority. Under its self-reliance push, India continued to shield critical sectors while selectively opening markets through reciprocal trade arrangements. A notable gain came towards the end of the year when Oman offered zero-duty access on 98 percent of its tariff lines under the Comprehensive Economic Partnership Agreement, providing a boost to Indian exporters and reinforcing India’s economic presence in West Asia.
High-level diplomacy supported this economic pivot. Prime Minister Narendra Modi’s December visit to Jordan, Ethiopia and Oman underscored India’s intent to combine strategic outreach with trade, energy security and connectivity goals across West Asia and the Horn of Africa.
Beyond trade, India maintained a careful balance in its major power relationships. While defence, technology and security cooperation with the United States and Quad partners deepened, New Delhi continued pragmatic engagement with Russia, particularly in energy and defence—highlighted by President Vladimir Putin’s visit to India.
Meanwhile, neighbourhood tensions, including strained ties with Bangladesh and a brief military confrontation with Pakistan following the Pahalgam terror attack, demanded sustained diplomatic attention, reinforcing the complex backdrop against which India pursued its economic objectives.