President Trump met NATO Secretary General Mark Rutte on July 14 and emphasized that U.S. pressure on both New Delhi and Islamabad helped avoid nuclear escalation. Trump said his administration threatened to suspend trade talks unless both parties agreed to a ceasefire. Just days later, on July 16, he revealed that Washington was close to finalizing a trade deal with India—one meant to boost bilateral economic ties and reduce U.S. dependency on Chinese manufacturing.

Yet, experts caution that despite these diplomatic gestures, conflict with Pakistan diverts Indian resources from industrial development and global integration. India’s ongoing defense posture, airspace closures, and military tensions increase risks for investors and disrupt critical supply chains, especially in northern and western regions near the Pakistan border.

Domestic Constraints Weigh On India’s Manufacturing Potential

India’s ambitions to rival China as a global manufacturing power are already held back by chronic structural challenges. These include outdated infrastructure, bureaucratic red tape, legal barriers to land acquisition, and a shortage of skilled industrial labor. Furthermore, India remains the least integrated Asian manufacturing country in global value chains.

The suspension of the 1960 Indus Waters Treaty and threats to treat future Pakistan-based terrorist attacks as acts of war have heightened fears of recurring conflict. This volatile security environment risks further damaging investor confidence and limits India’s ability to position itself as an alternative to China—undermining U.S. efforts to realign global trade.

Analysts argue that Washington must move beyond short-term crisis management and invest in strategic mediation to stabilize South Asia. A calmer regional climate would not only aid India’s rise but also offer Pakistan a pathway to reduce its economic dependency on China and pursue domestic reform.