Rao noted that Trump’s softer messaging was shaped by multiple factors: backlash to his earlier criticism, optics around Modi’s participation in the Shanghai Cooperation Organisation Summit, and weak US jobs data that makes stable trade ties more valuable. Yet, she cautioned that domestic opinion in India remains bruised by harsh commentary from US figures, demanding caution in tone and firmness in substance.
Edited excerpts:Q: Ambassador Rao, are these statements a sign that things will improve here onwards?
Rao: To give you a short answer, the tone today is better, but it’s an opening gambit, not a reset. If you ask me, are these statements a sign that things will improve, I would say they’re a de-escalation signal, certainly, and they buy both sides some breathing room.
President Trump has publicly called the India-US bond special—and Prime Minister Modi has reciprocated, and our External Affairs Minister has kind of amplified that framing. In a sense, this calms markets and bureaucracies enough to keep the channels open, but it doesn’t undo tariffs or resolve the frictions, as far as the US is concerned, in regard to our relations with Russia or China.
Q: What do you think has led to this positive signalling?
Rao: Well, first and foremost, I would say the risk of backlash. Because if you recall, President Trump said a few days ago that the US had lost India to deepest, darkest China, and that’s a line that spooks people, it spooks allies, it spooks partners. It definitely drew criticism. And the friendlier post, I suppose, his friendlier statement, corrects course, and our Prime Minister’s reply also meets it halfway. Now there’s the tariff overhang. The US duties, as we all know, are at 50% on a wide basket, and no new talks have been announced. Both sides, I believe, needed a political valve while the officials reassess the next steps.
Thirdly, the optics around the Shanghai Cooperation Organisation Summit. After the leaders at the SCO met around the end of last month and early this month, neither side—I believe neither the US nor India—wants the narrative to harden that India is drifting. So, a positive signal, like the one you heard yesterday, counters that.
And then finally, the domestic economic data out of the US—August jobs were weak, unemployment up to 4.3%. A softer economy, if you can call it that, raises the premium on predictable trade ties and calmer headlines. So, it’s an effort to calm the situation, to give it some stability. But we’re not there yet.
Q: You’ve also emphasised earlier that the domestic sentiment in India has been deeply bruised by the kind of statements that have been made by Howard Lutnick, Scott Bessent, and Peter Navarro—Lutnick even going to the extent of saying that India will have to say sorry. Does this mean we will have to be very cautious in picking up threads from here?
Rao: I think the Lutnick, Bessent, Navarro statements—or noise, or whatever you can call it—have definitely stirred a hornet’s nest, and domestic sentiment is rather bruised in India, as I’ve said before. Comments like Lutnick’s saying India will have to say sorry, calls for sanctions over Russian oil from Bessent, and Navarro’s jabs have landed very badly in India, and they will linger in public memory. Let’s not hide that. Therefore, all this noise, the way they’ve heaped scorn on us, I think there is a necessity for caution now in tone and, of course, firmness and substance, in trying to build the common ground that you referred to.
We have acknowledged Donald Trump’s remarks. Prime Minister Modi has acknowledged those remarks. But we have always rejected the premise of negotiating under ultimatums. That is not our style, that is not our approach, that is not our policy. We will pivot according to our interests, and I think that is the best way forward.
Q: How do you think India should approach talks from here onwards? Should we insist on one deal that removes not only the 25% additional penalty but also addresses concerns on our reciprocal tariffs?
Rao: I think we should be calm, but we should be transactional, and our approach should be layered. I think the first priority is to de-risk. Perhaps—and I’m not privy, of course, to discussions within government—but I believe we could propose a narrow stabilisation package: export facilitation, carve-outs for critical supply chains, defence co-production continuity, and so on. All this doesn’t require touching the biggest political landmines on day one.
Then perhaps a laddered trade track. Phase One: removing 25% of the additional penalty layer on top of baseline duties. Phase Two: addressing reciprocal concerns like select tariff lines, data standards, agricultural quotas, with performance-based triggers. And the US itself has noted that the 25% add-on is the immediate choke point for resuming talks, as even our press has reported.
And thirdly, we need very quiet offsets—maybe targeted energy and security purchases that are commercially rational but visibly count in Donald Trump’s ledger without, of course, affecting our strategic autonomy.
It’s better to sequence things than bundle everything, because you don’t want a single deal that will invite last-minute moving of goalposts. We take it step by step, bank the relief early, and condition the next tranche on verifiable steps on both sides. You want small, bankable bites, right?
Q: Scott Bessent has, on Sunday, again said that they are considering, along with the European Union, further sanctions, further secondary tariffs on countries that buy Russian oil because they want to cripple the Russian economy and not allow it to wage the war. So, more sanctions and more secondary tariffs are not off the table. How should we read the sentiment in the US when you also have this threat of further sanctions against India?
Rao: I think there are lessons to be learned about engaging this administration, and particularly President Trump. Forget what Bessent is saying and the very negative messages that continue to be directed towards us. When we deal with this administration, particularly with the top leadership—with Donald Trump—I know this is difficult for us to stomach at this time, but he’s looking, I think, for personal respect and institutional receipts.
So, if he is able to send out positive signals to us, we can be courteous and make it visible that our leader-to-leader messages are in the right tone. He will keep citing his wins, but even as we respond to him in as positive a manner as we can, provided he is positive too, I think it’s wise to anchor everything in written and measurable side letters.
So, front-load the optics, whatever they are, but back-load the substance. Tie whatever concessions we make to dated milestones, because this administration—even where deals have been reached, as they have with Japan and South Korea—is prone to changing them. We need very defined milestones, and we should never trade autonomy for atmospherics. Praise costs nothing. We need to look at what action is being taken on the ground.
So, there are lots of benefits, but also a lot of risks to personal diplomacy. The benefits may be unblocking the agenda, have line stability, but the risks include volatility and ultimatums, like Besant demanding some deal after each concession. So, we must pair personalised diplomacy with structured guardrails. This requires constant evaluation. It’s like a patient in the emergency ward—you need to constantly monitor it, and you also have to be able to defend what you do domestically within the country. That’s also important.
Q: Ambassador Rao, a question about buying Russian oil. All data shows that we will remain the number two biggest buyer of Russian oil in September. This is important for our strategic and energy needs, and we’ll continue to do so. How will we show the US that we can reduce or trim purchases from Russia, or that we have a strong intent to help the US in ending the war? Because currently, this seems to be a priority for the US administration, especially Donald Trump. He has this goal of being the person who ends the Russia-Ukraine war. How does India help him or make a compromise without cutting down our strategic partnership with Russia?
Rao: We’ve never been for the war in Ukraine. We’ve been very vocal about the need for peace and the settlement of the conflict between Russia and Ukraine. So, nobody can doubt our credentials as far as that is concerned.
As far as the import of Russian oil is concerned, obviously we will be dictated by our strategic interests, by our energy needs, by our own energy security and what is good for the country. I don’t believe we, in any way, have been profiteering, as Bessent and Navarro and others have been calling it, or reaping benefits for ourselves. Those charges need to be firmly refuted.
The United States has to understand there is an energy calculus here, and whatever we’ve done has been within the G7 price cap compliance. So, there should really not be these Bessent-style noises continuing to be made. What we need is a 24/7 hotline protocol with the United States so that we can deal with rhetoric spikes. Statements like these should not escalate the problem; they should look at de-escalation.
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