Donald Trump has scripted a spirited comeback in the hotly contested US presidential elections. For India, this outcome has both positive and negative implications, given the strategic importance of the US-India relationship in trade, security, and geopolitics.
Foreign minister S Jaishankar recently remarked that the US may lean towards a more isolationist stance, regardless of whether Donald Trump or Kamala Harris won. For India, the dynamics with the US entail a mix of potential gains and challenges that both parties bring. With a Trump-led administration, India stands to benefit on issues like China and defence collaboration, yet faces concerns around protectionism and potential trade conflicts.
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Trump’s victory may negatively affect stocks across Asia.Indian stock markets could experience a short-term rally due to an uptick in US equities. However, sustained gains would hinge on India’s earnings momentum and valuations, both of which remain weak. While the result may offer a temporary market boost, the sustainability of this surge is uncertain.
Strengthening the stance on China
A central aspect of the Trump administration has been its vocal stance against China, framing it as a strategic rival. India, sharing a disputed 3,488-kilometer border with China, has felt the impact of Beijing’s assertive policies for decades. The new Trump administration is expected to build upon this approach, reinforcing alliances like the Quad—a strategic partnership between the US, India, Japan, and Australia—created to counterbalance China. This could lead to expanded defence cooperation, including increased arms sales, technology transfers, and joint military exercises.
Analysts predict that India might gain from fresh tariffs Trump could impose on China, potentially accelerating the shift of manufacturing from China to India. In contrast, a Harris administration might have pursued a policy of de-risking rather than decoupling with China, indicating a more cautious approach.
A Trump administration could amplify scrutiny on supply chains tied to China, urging India to strengthen its own manufacturing capacities in critical sectors. As the US seeks to reduce its dependence on China for essential goods, India may find new export opportunities, particularly in sectors like pharmaceuticals, electronics, and textiles. This shift aligns with India’s Production Linked Incentive (PLI) schemes, designed to boost domestic manufacturing. However, India would need to improve its ease of doing business and invest in logistics infrastructure to become a viable alternative to China, especially as countries diversify their supply chains.
Defence industry experts expect a Trump administration to enhance arms sales to India, potentially accelerating deals for advanced military equipment. This move could support India’s modernisation of its defence forces, especially given rising security concerns along its northern borders. The Trump administration is likely to facilitate faster approvals for high-value defence exports to India, which could include drones, missile systems, and naval technologies. Strengthened military ties would not only increase India’s defence capabilities but also deepen strategic interoperability between US and Indian forces, a critical factor in Quad operations aimed at stabilising the Indo Pacific.
Immigration of Indian professionals
The Trump administration is anticipated to maintain its restrictive stance on immigration, particularly around the H-1B visa programme, which affects many Indian professionals. During Trump’s first term, policies aimed at raising wage requirements and adding restrictions for foreign workers created challenges for Indian IT professionals and firms dependent on skilled labour. If Trump pursues similar policies, it could impact India’s talent pool in the US and disrupt tech firms relying on skilled Indian employees.
Trump might continue his approach of fostering stronger technology ties with allies, including India. While immigration restrictions could limit Indian tech professionals’ mobility, the need for robust technology partnerships to counter China’s influence may drive the US to expand digital trade agreements with key allies. India could find opportunities to partner on AI, cybersecurity, and quantum computing initiatives, possibly gaining access to new markets for its IT services and innovations. However, India would need to balance this engagement with data privacy concerns and its own regulatory goals, especially as the US pushes for open digital markets.
US-India trade relations
A Trump administration is likely to reassert an America First stance, pushing a highly protectionist agenda. Trump’s previous term saw criticism of India’s high tariffs on American goods, with calls to reduce tariffs on items like Harley Davidson motorcycles. With Trump 2.0, India might face challenging negotiations over trade tariffs and access to American markets.
Jaishankar noted that while difficult negotiations lie ahead, Trump has fostered a positive relationship with India. Nevertheless, a more protectionist Trump administration could reshape trade dynamics, particularly impacting sectors reliant on Indian exports, like pharmaceuticals and IT. While India’s exports to the US have nearly doubled over the past decade, reaching $77.53 billion, the heightened tariffs and protectionism could create hurdles.
Fiscal expansion and inflationary pressure
Trump’s policies around fiscal expansion could drive inflation, impacting commodity-linked sectors. Indian pharmaceutical exports might face increased scrutiny due to potential US tariff revisions, while trade conflicts could reduce discretionary spending in the US, affecting India’s IT sector. Additionally, delays in interest rate cuts could lower foreign portfolio investment (FPI) inflows into India and delay domestic rate cuts, exacerbating the current economic slowdown.
Trump’s climate policies may also affect India’s access to climate finance. With the US withdrawing support for global climate funds and scaling back international climate commitments, India may face funding gaps in its green transition. Access to climate finance is essential for India’s ambitious renewable energy targets, including its efforts to reach net-zero by 2070. A potential pullback from global environmental coalitions might delay collaborative projects, technology transfers, and concessional funding, compelling India to rely more heavily on bilateral or regional climate initiatives.
Trump’s victory is expected to favour traditional energy sectors through deregulation, benefiting oil, gas, and coal industries. The Trump administration’s previous stance that climate change is a hoax suggests that initiatives to address environmental issues could be deprioritised. In contrast, a Harris administration might have placed a stronger emphasis on renewable energy initiatives, benefiting sectors like solar, wind, and electric vehicles.
For India, a Trump administration presents a complex array of opportunities and challenges. While India may gain through a strengthened stance against China and increased defence cooperation, there are concerns around heightened protectionism, restrictive immigration policies, and trade tensions. As India navigates this landscape, diplomatic agility will be essential in managing both the opportunities and challenges posed by a second Trump administration.