The United States is reshaping its Asia strategy as it accepts that China can no longer be contained at an acceptable economic or military cost. This shift is reducing India’s strategic importance in Washington’s calculations while expanding US engagement across South Asia. As both the US and China compete for influence in India’s neighbourhood, New Delhi must act to preserve its strategic autonomy and rewire regional leadership.
The shift in American approach is driven by declining influence and a series of strategic setbacks. In Europe, the Ukraine war has imposed high financial and military costs on Washington, which now wants European nations to shoulder more of NATO’s burden. In the Middle East, the Iran war proved costly for the US. Iran was not subdued, while attacks on US bases in Gulf countries weakened confidence in America’s security guarantees and made close ties with Washington appear riskier for regional stability. Old US partners such as Saudi Arabia and the UAE are expanding ties with China.
In the Indo-Pacific, despite housing thousands of troops and maintaining military alliances with Japan, South Korea, Australia, and many ASEAN countries, and being part of frameworks such as the Quad and the Australia–UK–US Security Partnership, the US faces a different reality. China has become the largest trading partner for most economies in the region, and Asian manufacturing supply chains remain deeply tied to the Chinese industry. This economic dependence has made many governments reluctant to fully align with US strategic objectives against Beijing. Malaysia’s withdrawal from the trade deal with the US is an example.
As Washington recognises these limits, its China strategy is changing. Instead of trying to contain Beijing, it increasingly appears to be treating China as a de facto equal — a G2 partner. In the Asia-Pacific, the US is seeking to preserve its influence without openly confronting China. It has become noticeably quieter on issues such as the Quad and Taiwan to avoid provoking Beijing.
Washington’s view of India is also undergoing a shift. For nearly two decades, India was central to Washington’s Indo-Pacific strategy and the Quad was a democratic counterweight to China. But, Washington now sees India not as a key strategic partner but more as a large market for American goods and technology and a subordinate partner. The February 7 US-India joint statement calls for India to align its economic and security interests more closely with those of America. Strategic cooperation is increasingly giving way to greater US strategic influence over India.
The US now appears to be following China’s playbook by expanding its engagement across South Asia. China has spent more than a decade building its “string of pearls” through ports, infrastructure financing and connectivity projects in countries around India. Its regional presence now includes the China-Pakistan Economic Corridor, Gwadar Port, Hambantota Port, Colombo Port City, Belt and Road projects in Nepal, major investments in Bangladesh and infrastructure projects across the Maldives.
Rather than treating South Asia as India’s natural sphere of influence, Washington is deepening defence, maritime, digital and infrastructure cooperation with Bangladesh, Sri Lanka, Nepal and the Maldives. The appointment of Sergio Gor as both US Ambassador to India and Special Envoy for South and Central Asia reinforces the impression that Washington increasingly views South Asia as an integrated strategic space rather than through an India-centric lens.
This competition will give Bangladesh, Nepal, Sri Lanka and the Maldives greater leverage to play India, China and the US against one another to extract economic and political concessions.
Both Washington and Beijing also have an interest in keeping Pakistan strategically relevant as a counterweight to India. Pakistan has positioned itself as a swing state by maintaining close ties with the US, China, Saudi Arabia, Qatar, Türkiye and Iran. As the world’s only nuclear-armed Muslim country, it holds growing strategic value in West Asia. Its ability to engage both Sunni states (Saudi Arabia, Qatar, the United Arab Emirates, Kuwait and Türkiye) and Shia states (primarily Iran) further strengthens its regional influence. As the US and China view Pakistan as an important partner, India’s strategic environment becomes more challenging.
While India’s trade surplus with South Asia has grown from about US$6.7 billion to nearly US$20 billion over the past two decades, its political and strategic challenges remain. SAARC is largely dysfunctional, and relations with Bangladesh, Nepal and the Maldives continue to fluctuate. Pakistan is a failed state thriving on external steroids. Intensifying US-China competition is likely to deepen these challenges.
India cannot stop great-power rivalry in South Asia, but must avoid becoming an object of external power-politics. The playbook is simple. India must strengthen its economic base by prioritising manufacturing, artificial intelligence, semiconductors, critical minerals, defence production, and other advanced industries, while reducing its dependence on imported industrial inputs from China.
It should preserve strategic autonomy by keeping relations with both Washington and Beijing transactional and judging each issue on its merits. India must build connectivity projects, more responsive development partnerships and consistent political engagement with most neighbours.
Finally, India must avoid actions that create confusion about its longstanding positions. For example, India has consistently rejected third-party mediation with Pakistan, as it did by dismissing President Donald Trump’s claim of mediation during Operation Sindoor. It should therefore avoid forums that invite outside powers into South Asian affairs. India’s high-level participation in the June 25–26 South Asia Dialogue in Colombo, alongside representatives from Pakistan, the US, the UK, Sri Lanka and the Maldives, blurred that position.
At a time when both Washington and Beijing are expanding their influence in South Asia, India should avoid actions that could be seen as accepting a larger role for external powers in its neighbourhood.
The writer is founder, GTRI
Pakistan’s Prime Minister Shehbaz Sharif and Army Chief General Asim Munir recently met US President Donald Trump at the White House, showcasing the country’s alleged rare earth mineral. (Photo: X/@Incognito_qfs) 
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