Look West: Why the US Is Becoming the Biggest Source of Geopolitical Risk for India

For a long time, geopolitical risk meant one thing.

Trouble in the Middle East.
Oil supply disruptions.
Wars that blocked trade routes.
Sanctions that slowed down global supply chains.

That definition no longer fits today’s world.

The biggest geopolitical risk today is not coming from supply chains.
It is coming from consumption, especially consumption in the world’s largest economy - the United States.

This shift matters deeply for India.

How Geopolitical Risk Has Changed

Earlier, geopolitical shocks were mostly about availability.

• Will oil flow from the Gulf?
• Will factories shut down due to war?
• Will shipping routes remain open?

Countries and companies learned to manage this risk by:

• Diversifying suppliers
• Building alternate supply chains
• Adopting “China Plus One” strategies

But today’s risk is different.

The world is now facing a situation where access to the US consumer itself can be restricted, delayed, or weaponised. When the largest consumer market uses its buying power as leverage, traditional risk management stops working.

Can the US Really Be a Source of Geopolitical Risk?

At first glance, this sounds counter-intuitive.

For decades, the US was seen as:

• A safe haven for capital
• A stable trade partner
• The final destination for global goods and services

When global uncertainty rose, money flowed into the US, not away from it.

That perception has changed.

The US has increasingly used its economic and political strength to shape outcomes in its favour, even if it creates uncertainty for others. Tariffs, sanctions, visa controls, and unilateral actions are no longer exceptions. They are becoming tools of negotiation.

How the US Is Creating Geopolitical Risk Today

The shift is visible across multiple fronts.

1. Trade and Tariffs

The US has repeatedly used tariffs as pressure tools, often outside the traditional World Trade Organization framework. Countries without favourable trade deals face penalties, making multilateral trade rules less relevant.

2. Visa and Talent Restrictions

Tightening of H1B visa norms and higher thresholds directly affect countries like India that export skilled services. Indian technology companies, in particular, have felt this impact.

3. Sanctions and Resource Control

Recent actions involving Venezuela highlight a deeper concern. The message is clear: access to resources can be overridden by state power, and global institutions may remain silent spectators.

4. Selective Global Enforcement

International bodies often struggle to act when large powers take unilateral decisions. This weakens predictability and increases risk for emerging economies.

Together, these actions signal a new reality. Geopolitical risk can now be created deliberately, not just triggered by conflict.

Why This Matters So Much for India

India has been one of the countries most exposed to this shift.

The impact has come in layers:

• Technology and IT services still depend heavily on the US for revenue
• Trade negotiations have stalled, increasing tariff uncertainty
• Oil purchases, including Russian crude, have added geopolitical friction
• Export-oriented sectors face demand concentration risk

When access to the US market becomes uncertain, India’s growth engines feel the pressure.

The China Plus One Problem

Over the last few years, companies globally adopted the China Plus One strategy to reduce supply chain risk.

This worked for manufacturing and sourcing.

But consumption risk is harder to fix.

You can move factories.
You cannot easily replace the world’s largest consumer market.

When the US restricts access to its consumption, diversification becomes far more complex. That is the structural challenge India and other export-oriented economies are now facing.

What Puts India in a Better Position

Despite these risks, India is not without protection.

One key factor stands out.

India’s economy is largely driven by domestic demand.

Roughly:

• Close to 65–70% of India’s GDP comes from internal consumption

This means:

• Growth is not entirely dependent on exports
• External shocks have a cushioning effect
• Policy flexibility is higher than in export-heavy economies

This does not eliminate risk, but it reduces vulnerability.

What India Needs to Do Next

To handle this new form of geopolitical risk, India needs a clear long-term approach.

Some priorities stand out:

• Reduce over-dependence on any single export market
• Build deeper trade relationships with Asia and the Global South
• Strengthen domestic manufacturing and services demand
• Support export sectors in diversifying client geographies
• Accept that global trade will be more fragmented going forward

This is less about reacting and more about preparing.

The Bigger Picture

The US will remain the world’s largest economy and a major global force.

But it is no longer a neutral anchor of stability.

Consumption itself has become a geopolitical lever.
Predictability has reduced.
Rules are more flexible for those with power.

India’s advantage lies in its scale, domestic demand, and long-term growth potential. Navigating this new world requires realism, diversification, and patience.

Key Takeaways

• Geopolitical risk has shifted from supply chains to consumption power
• The US is increasingly using economic access as leverage
• India’s export sectors are more exposed than its domestic economy
• China Plus One works for supply, not for consumption risk
• Strong domestic demand gives India a buffer, not immunity
• Long-term diversification is the only sustainable response

Disclaimer: This article is for general information and educational purposes only and should not be treated as financial, legal, tax, or investment advice.