President Trump in his speech on Afghanistan policy on 23 August 2017 laid out a new direction for US Afghan policy in these words: "Today, 20 U.S.-designated foreign terrorist organizations are active in Afghanistan and Pakistan, the highest concentration in any region anywhere in the world. For its part, Pakistan often gives safe haven to agents of chaos, violence and terror. ...In Afghanistan and Pakistan, America’s interests are clear. We must stop the resurgence of safe havens that enable terrorists to threaten America. ... The next pillar of our new strategy is to change the approach in how to deal with Pakistan. We can no longer be silent about Pakistan’s safe havens for terrorist organizations, the Taliban and other groups that pose a threat to the region and beyond. ... It has much to lose by continuing to harbor criminals and terrorists. But Pakistan has also sheltered the same organizations that try every single day to kill our people. We have been paying Pakistan billions and billions of dollars at the same time they are housing the very terrorists that we are fighting. But that will have to change. And that will change immediately. No partnership can survive a country’s harboring of militants and terrorists who target U.S. service members and officials. It is time for Pakistan to demonstrate its commitment to civilization, order and to peace."
He also restated, "Another critical part of the South Asia strategy for America is to further develop its strategic partnership with India. ..We are committed to pursuing our shared objectives for peace and security in South Asia and the broader Indo-Pacific region."
Pakistan Sponsored Terrorism
As experts on insurgency and guerrilla war know from history, an insurgency has never been defeated without eliminating insurgent sanctuaries and safe heavens in neighboring countries. Yet the US has fought a loosing 14 year war in Afghanistan with leaders of insurgent groups ensconced in safe heavens in cities & towns of Pakistan and insurgent fighters moving in and out of sanctuaries in Baluchistan and Northern areas of Pakistan. The US President's policy is an unambiguous recognition that victory is only possible if these safe havens & sanctuaries are eliminated.US & West's tacit support (Government's ignored, experts justified) for Pakistani terrorism, promoted internally as Jehad against the Kafirs, has emboldened the Pakistani military to use it as an instrument of State policy. A clear recognition by Developed country governments, analysts & academics, of the Pakistan military's role in promoting #SalafiTakfiriWahhabi Islamist terrorists is the most important step in dealing with this menace which has been allowed to flourish for 25 years. Now that the President of the USA is clearly & formally changing this policy, the risks to Pakistan Military for continued use of this policy will jump manifold. By mentioning India's role in S Asia (Afghanistan to Bangladesh) in a policy statement on Afghanistan, the US president is also signaling that the use of India bogey to justify support for terrorist killers of US citizens and soldiers is no longer acceptable. President Trump bringing India into the picture in the modified context, also expands range of options US has to force the Pakistan military to give up Jehadi Terrorism as an instrument of State policy.
One argument made by "Pakistan experts" is that Pakistan Army doesn't have the capability to act against the terrorist who target Afghanistan, India, USA and the rest of the world. If this were true, the obvious solution is to either allow US special forces into Pakistan or allow the UN to organize a special UN anti-terrorism force to hunt these terrorists in Pakistan, starting with the Northern areas, Baluchistan & KP. The argument is actually specious, when designated terrorists, freely roam across Pakistan, appear on TV, raise funds for Jehad on street corners & outside mosques, spew hate against Kafirs in Madrassas & public parks and participate in political activity.
Effect on Pakistan
The heightened risk to Pakistan will make the Pakistan military more cautious but not by itself change Pakistan's policy of providing sanctuaries to Taliban/Haqqani's (or Let, JUD, HM et al) unless the costs of doing so are increased substantially. For the US, the opening gambit is likely to focus on one or more of the following elements, to convey its serious intent: (1) Revoking Pakistan's status as major non-military ally (2) Sanctions against known associates and supporters of Designated Jihadists like Sirajuddin Haqqani & Masood Azhar (3) Stronger constitutionality on and consequent gradual reduction in, US Aid, of which Pakistan is among the top recipients.
There is little cost to the USA from the first two actions and substantial benefits/savings from reducing Aid to Pakistan (which can be used to strengthen Afghan forces). Pakistan and Pakistani supporters of Jehad, clearly lose from these actions, even if as some experts suggest China steps forward to replace the Aid. This merely means that Pakistan & China share the costs, the costs don't vanish as these experts imply. Over the last 5 years China has already stepped up its announced aid commitments to $63 billion to $100bi to little affect ( https://www.devex.com/news/pakistan-s-100b-deal-with-china-what-does-it-amount-to-90872#.WZ7fKwCHJtc.twitter). Any replacement of current US Aid by China is likely to be even less effective
Will Pakistan react by disrupting the US land & air access to Afghanistan, limiting intelligence cooperation wrt global terrorists or denying tacit support to drone targeting of what they consider "bad Taliban". Possibly, but the only action that can seriously hurt the US war effort in Afghanistan is the first and this will be seen as a deceleration of unconventional war against US and will be met by actions that seriously hurt the Pakistan Military.
Intelligence & Drone targeting
If Pakistan cuts global intelligence cooperation, resulting in another terrorist attack linked to it in US, the US Government will hit it hard, a risk they cannot afford to take. Similarly a reduction in intelligence co-operation that results in major terrorist attack on India will be met by much stronger action by India, than earlier. Intelligence information to target "bad Taliban" is highly selective and targets those who are the greatest threat to the Pakistan military, so non-cooperation will harm them more than the US. It will also free any remaining constraints on US actions. For instance if US drones are not formally permitted to target terrorists in Pakistan, the US will be free to use other locations from which drones can be sent to target terrorists and other partners who can undertake these missions(with deniability). Pakistan foreign Aid saved can also be used to train & equip Afghan special forces to retaliate against Taliban/Haqqani's in Pakistan sanctuaries.
US supply lines
The only cost effective tool that Pakistan has to hurt US effort in Afghanistan is the control over transit of US military personnel and supplies to Landlocked Afghanistan. However If Pakistan cuts the US land & Air bridge to Afghanistan, US constraints restraining India from targeting terrorist leaders in Pakistan could be lifted. Alternatively, any Pakistan policy that really hurts US interest can lead to US diplomatic retaliation such as recognition of Indian position on J&K. The US (and Indian) objective in Pakistan is to shut down terrorist sanctuaries in Pakistan, not to hurt Pakistani citizens. Once these sanctuaries are wound down, the US War against the #SalafiTakfiriWahhabi Taliban forces in Afghanistan is easily won.
Can India do anything more to promote the joint US objective of diluting & eliminating #SalafiTakfiriWahhabi jihadism and terrorist safe havens from Pakistan and Afghanistan? The existing Indian efforts to promote Afghanistan's economic, institutional & military development can be intensified within the limitation of resources. Perhaps some of the resources released by reduction of US Aid to Pakistan can be used by USA to cost effectively outsource some existing US plans to India. More importantly, Co-ordination of India-US efforts to address the terrorist challenge in S Asia, must be formalized and institutionalized, perhaps under the 2+2 mechanism announced earlier. India can explore the possibility with USA & Iran of using the Chhabhar-Herat corridor for transit of military supplies for the Afghan defense forces, thus providing a competitive supply route to Afghanistan.