Gauging Trumponomics For India

Donald Trump made history on 5 November 2024 as he became the first person to win a non-consecutive term as the United States President since Grover Cleveland in 1892. Trump winning the election, which was supposed to be a tightly contested one, signals a new political era - both for the United States and the world. As the results continued to pour in for certain swing states, at the time of writing, the possible ramifications of Trump 2.0 were under the radar over the world, reminiscing areas of tension in his first term.

Prime Minister Narendra Modi congratulated Trump, addressing him as his friend and pushed for renewed collaboration to strengthen the India-US Comprehensive Global and Strategic Partnership. Later, during a phone call with Trump, Modi stressed cooperation on technology, defence, energy, space, and "several other sectors." Going by history and Trump's campaign this year, his economic program on the global front primarily revolves around higher tariffs and a crackdown on immigration.

For India, it is precisely these two areas where there could be some headwinds in the medium term, beyond the personal camaraderie between the two leaders and India's geopolitical significance. A strong believer in protectionism being essential for American prosperity, Trump's first term was marked by tension as his administration imposed scathing tariffs on Indian steel and aluminium, removed India from the Generalised System of Preferences Program (GSP), and tightened the H-1B visa regulations, impacting Indian IT companies and professionals.

Nomura, in one of its reports in September, cautioned that India's trade surplus with the US under Trump's new administration may come under scrutiny but, importantly, sees it being mitigated by America's China Plus One strategy. It expects this strategy to gain momentum as the US aims to shift supply chains away from China.

Similarly, the new administration could tighten scrutiny of H-1B visa applications, narrowing the eligibility criteria and reducing the number of vissas to ensure that American workers are not displaced. Indian companies could face renewed pressures to limit offshore operations, which may impact their margins.

Trump's anti-climate stance could also, in the short term, derail the global climate agenda, which India is a strong proponent of. India has led the efforts at previous COPs to call on the developed world to provide at least $1 trillion per year from 2025 to take a proactive stance towards fulfilling their climate finance commitments.

A key outcome of COP27 was the establishment of a "Loss and Damage" fund to help vulnerable nations cope with the impacts of climate change. Trump's stance of the US being disadvantaged through such agreements might deprioritise financing commitments, hindering the fund's effectiveness.

While these may be short—to medium-term headwinds and areas of strain under the new Trump administration, the broader Indo-US vision of counterbalancing China's influence and promoting a stable Indo-Pacific will ensure larger cooperation, especially in areas emphasised by Modi. However, Trump's hallmark unpredictability defies any reliance on past precedents. Navigating this element of unpredictability will be the challenge of the next four years.