Donald Trump’s return as the 47th president of the US will likely put Indo-US trade ties under sharp focus. Trump has promised a fresh wave of tariffs under his ‘America first’ stance, which may adversely affect countries like India and its key sectors such IT, pharmaceuticals, textiles, chemicals and automotive parts.
Trump’s beef with India’s tariffs in specific industries such as automobiles was amply clear during his first term; as recently as last month, he continued with his threat to impose reciprocal tariffs, terming India the “biggest tariff charger”.
He even proposed import duty increases of 10-20 percent across the board, which could potentially alter the balance of trade that remains in India’s favour with a surplus of $35.3 billion in 2023-24. Incidentally, the US is India’s largest export destination and second-largest trading partner after China; trade between the two democracies reached over $118.3 billion in 2023-24.
Over the past decade, trade has nearly doubled from $61.5 billion in 2023-14, but the fear of Trump 2.0 tariffs is making Indian exporters jittery.
Predictably, Indian currency and equity markets do not seem overly enthused with the prospect of Trump 2.0. While the rupee slipped 17 paise to an all-time low of 84.28 per dollar, both Sensex and Nifty tumbled on Thursday, erasing all gains made following the verdict.
That said, if Trump indeed pushes for decoupling from China, where he wishes to impose tariffs as high as 60 percent, the move could benefit India by potentially drawing more US companies looking to diversify supply chains.
A recent Nomura report suggested that despite probable strains on trade and immigration, India could benefit from Trump’s policies that drive supply chain diversification away from China.
Interestingly, though many fear that Indian exporters could face high customs duties under Trump 2.0, they also hope and anticipate that the incoming US administration would remain pragmatic and transactional in doing business.
Some also believe that Trump’s return to the White House may offer both opportunities and challenges for India-US relations. It remains to be seen if the warmth he shares with Prime Minister Narendra Modi will help mitigate the potential risks due to a tightened H1-B visa policy.
On balance, both have an opportunity to forge a partnership that is not only beneficial for India and the US, but also helps restore global trade imbalances.