- Moody’s cited that New Delhi stands to gain significantly from the shift of power after Trump’s victory, potentially benefiting from a reallocation of trade and investment flows away from China.
- Trade and economic partnership between the US and India have been a key component of the bilateral relationship, with the bilateral trade standing at $118.28 billion in 2023-24.
- During Trump 1.0, trade relations between both countries saw ups and downs, with Trump criticizing India’s trade practices, including tariffs on American products.
- Trump’s proposed tax cut would reduce corporate tax rates from 21% to 15%, which could stimulate investment and job creation within the US, offering new opportunities for Indian firms in manufacturing and supply chains.
Donald Trump made a historic comeback in the recent US election, winning 312 electoral votes to Kamala Harris’s 226 and becoming the first Republican to win the popular vote in two decades. Prime Minister Modi congratulated Trump, calling him a friend, and expressed eagerness to strengthen the India-US strategic partnership. External Affairs Minister S. Jaishankar also emphasized that India-US relations remain on a stable path, resilient through changing administrations, and are set to grow further, regardless of who leads the White House.
However, Trump becoming President is expected to impact India on various counts from terror to trade, besides Trump’s positive chemistry with India during his election campaign, Trump made many comments indicating his presidency will be favourable for India and Indians.
Market research firm Namura released a report on few months back that stated that Trump’s Victory would be more beneficiary to India “We see India as a relative beneficiary, due to its domestic demand-driven growth model and benefits from lower commodity prices, supply chain shifts and on foreign policy” report even added that “India and the US share deep economic and strategic interests that are unlikely to be compromised, irrespective of the election outcome. The US also sees India as a strategic counterweight to China on foreign policy. India is a large, domestic demand-driven economy, so the economic fallout of weaker US economic growth should be limited.”
Recently global rating agency Moody’s cited Hindustan Times that New Delhi stands to gain significantly from the shift of power after Trump’s Victory “In the Asia-Pacific region, the world may witness a reallocation of trade and investment flows away from China due to heightened US scrutiny in strategic sectors. This shift will likely negatively impact China’s economy and dampen regional growth. Conversely, nations such as India and those in ASEAN could find new opportunities in this changing landscape,” said Moody’s, quoted by the news portal.
Trade and economic partnership between the US and India have been a key component of the bilateral relationship. The bilateral trade between India and US stood at $ 118.28 billion in 2023-24. Washinton was one of the top trading partners of New Delhi during 2021-22 & 2022-23. India has a trade surplus of $ 36.74 billion with US in 2023-24. The US is one of the few countries with which India has a trade surplus.1
But when we analyze the data Indian exports to the US witnessed a slight decrease of 1.32 per cent, amounting to US$77.5 billion in FY24, compared to US$78.54 billion in 2022–23. Additionally, imports from the US declined by approximately 20 per cent, settling at US$40.8 billion, as indicated. As per the reports PHD Chamber of Commerce and Industry (PHDCCI), The Trade between both is likely to be estimated at US$ 300 Billion in FY 2026-27. According to a CII study released in April 2023, 163 Indian companies invested over US$40 billion in the US and created over 425,000 direct jobs. The US is the 3rd largest investor in India, with cumulative FDI inflows of US$ 62.24 billion from April 2000 to September 2023.2
Trump’s recent victory has given a kind of audacity of hope for the future of his relationship with India, with his always emphasized “America First” suggesting that his next term could be marked by more prognosed isolationism. However, his warm rapport with Indian Prime Minister Narendra Modi which was first showcased during “Howdy, Modi!” and “Namaste Trump” — promises a unique diplomatic. This bond between the two leaders could prove pivotal as they steer relations between the world’s oldest and largest democracies. During his Trump campaign, he’s been seen as quite vocal about the treatment of Hindus in Bangladesh.
The Jugal Bandi of both has its own sets of expectations as both the leaders are pro-business stances and have been focusing on economic growth, championing themselves with business innovation, deregulation and economic development. They both have a significant role in the global economic stage as both nations are motivated by a common interest: India aims to be the third largest economy while the US seeks reliable allies to counterbalance China’s growing interest.
During Trump 1.0 trade relations between both the countries saw ups and downs. Trump has criticised India’s trade practices, including tariffs. The US also raised Import duty on Indian steel and aluminium products during Trump’s first term. Trump called India a tariff king and criticized high duties that New Delhi imposed on American products such as Harley-Davidson motorcycles, In May 2019, Trump terminated India’s preferential market access to the United States, accusing India of not giving the US reasonable access to its markets. It has been debated that in his second term, Trump can push for tax breaks and lower import duties for American companies like Tesla Inc. Harley Davidson has previously cited India’s high import tariffs as a hindrance to Harley Davidson’s expansion.3
In Trump 2.0 there is expectation for Lower corporate taxes with his recent poll promise of reducing corporate tax rates, particularly for manufacturers operating within the US. Trump’s proposed tax cut would reduce corporate tax rates from 21% to 15%, which could stimulate investment and job creation within the US. For India, this means: that Indian companies with significant presence, especially in IT services and manufacturing, could benefit from the growth in US corporate investments and capital expenditure (capex). This could create new opportunities for Indian firms offering manufacturing services or supply chain solutions.4
While lower taxes may be benefiting US Businesses higher interest rates in the US as a result of Trump’s fiscal policies could constrain India’s borrowing costs, particularly affecting NBFCs (Non-Banking Financial Companies) and banks. With the US Federal Reserve likely maintaining or increasing rates to tackle inflationary pressures from Trump’s expansionary policies, India’s borrowing rates may stay elevated, posing a challenge for financial institutions that rely on lower rates for growth.
Trump has proposed a 60% tariff on imports from China, along with additional tariffs of 10-20% on goods from other countries. These measures aim to reduce U.S. reliance on Chinese imports, which could disrupt current trade and push companies to find new manufacturing locations. India might benefit from this shift in global supply chains away from China. India’s exporters in sectors like chemicals, electronics manufacturing services (EMS), auto ancillaries and solar panels could benefit from this as companies look to diversify away from China. Increased tariffs on Chinese goods could open up opportunities for Indian manufacturers to step in and fill the supply gap in the US market.5
India’s life sciences and pharmaceutical sector is closely watching how the “America First” policy under Trump could impact trade, FDA rules, and access to the U.S. market. While experts see both challenges and opportunities, they don’t expect major changes to FDA regulations that would affect Indian companies. Prashant Khadayate, Director of Lifesciences Consulting & Research at Global Data, points out that while higher tariffs on Indian pharmaceutical exports could be a problem, the strong demand for affordable generics in the U.S. should keep India’s medicines in demand. He believes the focus on cost-effective healthcare will maintain interest in India’s high-quality generics, even if protectionist policies are introduced.6
Trump’s foreign policy aims to reduce U.S. involvement in global conflicts, especially in the Middle East and Europe. His support for U.S. oil and gas production could lower global oil prices. For India, this has mixed effects: If oil prices fall, it would help India, which imports most of its oil. This could lower fuel costs, reduce inflation, and improve India’s trade balance.
Trump’s push for more U.S. oil production could lower global oil prices by boosting investment in the U.S. His efforts to end the Russia-Ukraine war and ease Middle East tensions might also reduce the geopolitical risks that push high oil prices.
Trump’s victory has caused a significant shift across the various sectors, from trade and energy to fiscal policy and immigration. It promises the US economic growth for the short term, they can tackle inflationary and deficit-related challenges. For India, this seems like an opportunity bundled up with risks, with potential benefits stemming from a re-oriented global supply chain and challenges linked to global trade disruptions. It’s critical to monitor the implementation of Trump’s policies which will be impacting and shaping the global economy and market trajectories.
References:
- https://www.business-standard.com/economy/news/india-in-trade-deficit-with-9-of-top-10-trading-partners-in-2023-24-data-124052600247_1.html
- https://www.india-briefing.com/news/indias-trade-performance-fy-2023-24-exploring-new-export-markets-32612.html/
- https://m.economictimes.com/news/economy/foreign-trade/very-big-abuser-of-tariffs-what-exactly-is-donald-trumps-stance-on-india/articleshow/113529311.cms
- https://www.reuters.com/markets/us/wall-street-girds-trump-20-tariffs-tax-cuts-volatility-2024-11-06/
- https://www.livemint.com/news/world/trumps-tariff-bombshell-how-a-60-levy-on-chinese-goods-could-force-taiwanese-firms-out-of-china-11731088679878.html
- https://www.echemi.com/cms/2103142.html
Sourabh Shetty is a partner at Fiscal Focus LLP and a finance executive at Param Foundation. He writes on finance, economy and international affairs. Views expressed are the author’s own.
Aayush Pal 
Sindhuri Sai 
Parag Gilada