Trump’s policies on trade, immigration, and defense may reshape India-US relations.
Former US President Donald Trump’s return to office in 2024 has many across the globe, especially in India, paying close attention.
His business-oriented political style and strong ties with Prime Minister Narendra Modi have greatly shaped India-US relations.
However, his policy outlook, focusing on America’s interests, offers both opportunities and challenges for India.
A second Trump administration would likely influence key areas like trade, immigration, and defense, and could reshape India’s economic and geopolitical standing.
Trade Relations: Friend or Foe?
One of the defining aspects of Trump’s policy is his “America First” approach, especially in trade. Trump’s past stance included labeling India as a “tariff king” and expressing displeasure with what he perceived as India’s unfair trade practices.
According to data from the National Securities Depository Limited, FPIs sold off stocks amounting to Rs 94,017 crore in October. This comes after four consecutive months of being net buyers, where they purchased stocks worth Rs 26,565 crore in June, Rs 32,365 crore in July, Rs 7,320 crore in August, and Rs 57,724 crore in September.
He has indicated that if re-elected, he would push for a “reciprocal tax” system, which could lead to increased tariffs on Indian goods.
For India, the United States represents its largest export market, particularly for industries like IT, pharmaceuticals, and textiles. Increased tariffs could disrupt these sectors, negatively impacting India’s trade balance.
However, Trump’s cordial relationship with Modi suggests that diplomatic efforts might ease these potential hurdles, providing a foundation for negotiations that could be mutually beneficial.
In the bigger picture, a report by Nomura highlights that while Trump’s trade policies could strain India-US relations initially, they may also open doors.
As the US explores the “China Plus One” strategy, aimed at reducing reliance on Chinese supply chains, India could become a preferred destination for manufacturing and investment.
Such a shift would provide a significant boost to India’s manufacturing sector and align with Modi’s vision of making India a global production hub.
Immigration and Its Impact on India’s Workforce
India’s tech sector has been deeply affected by US immigration policies, especially under Trump’s previous administration. Trump’s emphasis on “Hiring American” led to more stringent rules around the H-1B visa, which many Indian IT professionals rely on to work in the US.
Indian credit rating agency ICRA, released a report, which stated that if the restrictions proposed by Trump were fully implemented, Indian IT companies’ operating margins would fall by 2.6% to 5.8%.
His policies included proposals to raise wages for visa holders and limit eligibility, making it tougher for Indian tech talent to access US-based opportunities.
If Trump’s policies return with another term, it could complicate matters for Indian tech companies.
India’s External Affairs Minister, S. Jaishankar has already pointed out that immigration will likely be a point of tough negotiation.
“For Trump, I think there will be some difficult negotiations over trade and immigration, although on many other issues, he has spoken about a very positive relationship with India and Prime Minister Narendra Modi,” Jaishankar told PTI.
Reduced access to the H-1B visa program would restrict the movement of Indian professionals, directly impacting the country’s large tech industry, which depends on its global footprint.
On the upside, such restrictions could prompt Indian companies to focus more on domestic growth and expand into other markets.
This shift may strengthen India’s tech ecosystem, spurring innovation and creating new job opportunities within the country. Indian tech firms may look to enhance their presence in Europe, Asia, and Africa to counterbalance the limitations posed by a restrictive US immigration policy.
Defense Cooperation
Trump’s previous term saw unprecedented strengthening of the India-US defense relationship, especially with a shared interest in countering China’s influence in the Indo-Pacific region.
Through initiatives like the Quad alliance (comprising the US, India, Japan, and Australia), both countries demonstrated their commitment to regional security. Major events like “Howdy Modi” and “Namaste Trump” underscored the symbolic and strategic nature of the India-US alliance.
While President Joe Biden has continued fostering defense ties, a Trump administration might bring a different approach. Known for his skepticism toward multilateral defense pacts, Trump may focus more on bilateral deals, directly benefitting India.
Defense cooperation would likely continue to thrive due to shared priorities in limiting China’s regional dominance. Increased arms sales, technology transfers, and joint military exercises could strengthen India’s defense capabilities in the face of growing security concerns.
However, India may need to navigate carefully if Trump adopts a more protectionist stance in defense.
There is potential for expanded US military support within the Quad framework, particularly if Trump views it as an essential component for regional stability.
Economic Opportunities Amid Trade Realignment
Trump’s desire to reduce US reliance on China could offer India an economic opportunity. With many American companies already exploring alternatives to Chinese manufacturing, India has positioned itself as a viable option.
According to JM Financial Institutional Securities, additional tariffs on Chinese imports could benefit India through the “China Plus One” strategy, particularly in areas like electronics, auto components, and chemicals.
This trade realignment could benefit Indian industries like electronics, textiles, and metals, as the US seeks reliable suppliers outside of China.
The textile sector, especially India’s ceramic tile industry, might witness increased demand as American buyers look for alternatives.
However, Indian exporters may face challenges in maintaining consistent profitability if global trade disruptions lead to price fluctuations.
For India’s manufacturing sector, especially in auto parts and metal industries, these shifts could present lucrative export opportunities.
However, to fully capitalize on the trend, Indian businesses may need to expand their presence in the US market and adapt to evolving trade policies under a potential Trump administration.
Energy and Technology: Expanding Strategic Partnerships
Trump’s first term focused heavily on promoting American energy independence and boosting exports, especially liquefied natural gas (LNG), to meet growing demands abroad.
With India being a significant importer of LNG, this focus could deepen energy ties between the two countries, providing India with access to stable energy supplies.
In the technology sphere, Trump’s stance against Chinese tech firms aligns closely with India’s own efforts to reduce Chinese influence.
Under Trump’s policies, India could benefit from increased cooperation on emerging technologies like 5G, cybersecurity, and space exploration.
As both countries look to limit their reliance on Chinese tech, a second Trump term may foster new collaborations in these fields, making India a critical partner in Asia for the US.
Balancing Opportunities and Challenges
A potential Trump victory in the 2024 US elections brings a complex mix of prospects for India. Trump’s close rapport with Modi and mutual concerns over China align their interests in defense, energy, and technology.
India’s role in the “China Plus One” strategy could attract investments, helping India diversify its trade and become a global production hub.
However, Trump’s “America First” policy could create roadblocks, particularly in trade and immigration. Higher tariffs and restrictive visa policies would require India to navigate carefully, adapting its economic and workforce strategies to these realities.
The coming years would demand skilled diplomacy from both sides, with India looking to strike a balance between the challenges posed by US policy shifts and the opportunities for strengthened partnership.
In the end, a Trump administration may redefine India-US relations, challenging India to leverage this moment for strategic growth.
If handled wisely, India could solidify its position as a vital partner for the US, contributing to a stronger alliance in global trade and security.
