With Donald Trump’s potential return to the U.S. presidency, India’s trade relations with the United States will undergo significant shifts. Trump’s “America First” approach will lead to increased protectionism. This will impact tariffs and trade in goods and services. It also affect the strategic economic relationship between the two nations. Here’s a detailed analysis of the expected impact on key sectors. A table follows summarizing the data.

1. High Tariffs Likely

One of the most immediate impacts is on Indian exports to the U.S., where tariffs increase on goods like automobiles, textiles, and pharmaceuticals. Trump’s administration will implement higher customs duties, affecting competitive pricing for Indian goods in the U.S. market.

2. Vulnerable IT Sector

Changes to H-1B visa rules can significantly impact India’s IT sector. These visas are a critical resource for Indian IT companies. They depend heavily on U.S. clients. Stricter visa policies would increase operational costs. They limit growth. Over 80% of India’s IT export earnings come from the U.S.

3. Bilateral Trade Figures

The India-U.S. bilateral trade in goods reached $120 billion in the 2023-24 fiscal year, marking a decrease from $129.4 billion in the prior year. This reduction reflects challenges in trade dynamics. There are potential shifts toward protectionism. There is also the possibility of even lower figures under heightened tariffs.

4. Trump’s Trade Policy

Trump’s administration has historically extended tariffs beyond China, targeting other nations with high tariffs, including India. Trump’s earlier label of India as a “tariff abuser” suggests that extra duties will be imposed on Indian exports.

5. Impact on Key Sectors

Indian sectors that rely heavily on U.S. exports, like automobiles, textiles, pharmaceuticals, and electronics, are to face increased trade hurdles. Tariffs and stricter negotiations make it more challenging for these sectors to keep their foothold in the U.S. market.

6. Protectionism Trends

A Trump administration will usher in a more protectionist era. It will emphasize domestic manufacturing. It will limit imports from countries with perceived high tariffs on U.S. goods. Such policies impact India’s trade volume with the U.S., favoring domestic U.S. suppliers over Indian exporters.

7. Potential Economic Opportunities

While higher tariffs create barriers, there are also opportunities for Indian exporters. As the U.S. continues to seek alternatives to Chinese imports, Indian companies could fill this gap. They can do so in sectors like manufacturing and technology, where they offer competitive products.

8. Trade in Services Growth

Despite challenges in goods trade, trade in services between the two countries is expected to grow. With India’s IT and business services demand rising in the U.S., both nations strengthen their economic ties beyond physical goods.

9. India’s Strategic Position

India’s alignment with U.S. geopolitical goals will increase under Trump, though it will limit India’s foreign policy flexibility. India will position itself as a reliable choice supplier. This position will lead to enhanced economic cooperation in critical sectors like defense and technology.

10. Opportunities for India

India’s growing demand for advanced technology and capital goods aligns with U.S. skills, driving bilateral trade expansion. Trump’s administration offers India opportunities to source technology and defense products from the U.S., reinforcing India’s modernization efforts.

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Key Data Summary Table

Aspect	Details
Expected Tariffs	Increased tariffs on Indian goods (automobiles, textiles, pharmaceuticals) under Trump’s “America First” agenda
Impact on IT Sector	Tightened H-1B visa rules could raise costs and impact growth for Indian IT firms reliant on the U.S. market (80%+ earnings)
Bilateral Trade (2023-24)	$120 billion in goods trade between India and the U.S., down from $129.4 billion in 2022-23
Key Sectors at Risk	Automobile, textiles, pharmaceuticals, electronics sectors face tougher trade negotiations
Protectionism Trend	Higher tariffs and stricter trade policies, with emphasis on reducing reliance on non-U.S. suppliers
Opportunities Amid Challenges	Potential for Indian exporters to replace Chinese imports in the U.S. market, especially in manufacturing and technology
Growth in Services Trade	Projected rise in trade in services (IT and business services) as India and U.S. strengthen non-goods economic ties
Strategic Position for India	Increased alignment with U.S. goals will expand India’s role as a substitute supplier in key sectors
Technology & Capital Goods	India’s demand for advanced U.S. technology and capital goods presents potential avenues for trade expansion

This analysis underscores the mixed impact of a Trump presidency on India-U.S. trade, with both hurdles and strategic openings for India in key sectors.

Source : Business Standard