With Donald Trump’s crushing victory last week over Democrat rival Kamala Harris and his Republican party set to control both houses of Congress, global concerns over Trump’s policies have risen. His absolute dominance of Congress will add troubling muscle to the anticipated, robust and impetuous Trump Presidency reminiscent of his first term.
Adding to the mix is an incoming Administration that is expected to include senior polarising figures in diverse areas - from sceptics of vaccines against pandemics to climate change deniers. However, in the arena of military conflict, Trump has a positive record, having not started any war in his first term of office, unlike several of his predecessors.
He seems suited for ending lingering wars such as Russia’s conflict with Ukraine; an expectation based on a widely held perception he and Russian President Vladimir Putin have the temperament and chemistry to engage in constructive dialogue. It was Trump after all who had paved the way for a swift pullout of US troops from Afghanistan in his earlier term, even though a full troop withdrawal was completed during the presidency of his then-successor, Joe Biden.
Significantly, he shows scant interest in the sentimental transatlantic ties forged with Western Europe following World War II. This disregard for sentiment, especially in providing Europe with security and in strengthening NATO, besides the imposition of tariffs and other trade irritants, may also force the EU to dilute its stance on ending the Ukraine war.
Instead of the transatlantic alliance, Trump is expected to prefer intensifying the US pivot to the prosperous and large markets of the Pacific and Indian Ocean hinterlands. The even greater emphasis on the Indo-Pacific region by the Trump Administration may help resolve the current turbulence in relations with India, a swiftly developing ally of recent decades.
Washington has regarded India in recent times as a lynchpin for its Indo-Pacific strategic construct and spearhead of the Quad (made up of India, Australia, Japan and the US) to confront and slow down China’s military and economic rise to global domination.
The purchase of Russian arms, the defying of US sanctions by importing Russian oil and the charge of Indian official complicity in an attempt to murder a US citizen of Sikh ethnicity have created tremors in India’s hitherto smooth shift of alignment from the Soviet Union and its successor Russia to the US over the past 25 years.
A partial revival of ties with Russia and the first signs of the calming of tensions with China over a disputed border may become complicated in an uncompromising Trump presidency. It places India in an awkward position in its practice of strategic autonomy in defying sanctions on Russia over Ukraine by its new ally, the US, by buying oil from Russia. Russia of course is China’s strong ally.
How India balances its strategic autonomy with a pragmatic policy of increasing trade with China despite sharp differences over a disputed border may becoming a harder task for New Delhi in Trump’s reign. However, underscoring everything else are the concerns over domestic economic policies that negatively impact nations across the globe.
Balancing ties between the US and Russia will be a far easier proposition for India — if Ukraine is resolved — than having to decide between the US and China in trade and investment, crucial factors for India in expanding its manufacturing sector and building of its infrastructure.
Prioritising an alliance against China could see the toning down of tensions in the Middle East, with Trump using his forceful nature and negotiating skills to keep Israel’s Benjamin Netanyahu in check in his pursuit of Hamas and Hezbollah rebels from Gaza to southern Lebanon.
In the Indo-Pacific, Trump’s chosen theatre of interest, he is expected to extend greater protection than the previous US Administration to thwart any attempt by China to forcibly affect a merger of the territory with the mainland. This may end up heightening tensions across ASEAN (Association of South East Asian Nations) and also threatens to involve India.
Trump’s focus may well be a tighter US embrace and promotion of the Indo-Pacific strategic architecture — a concerted bid to contain the rise of China, that may come to define his Administration’s limited overseas strategic outreach.
It meshes well with an inclination toward protectionism in economic policies. His ‘Make America Great Again” (MAGA) presidential campaign theme appears rooted in reversing much of the philosophy and economic strategy that was conceived and executed by the US to bring about the age of Globalisation.
In the decades up to the pre-Covid era, business leaders believed the world was moving towards borderless, free trade that sought out cheap labour and the advantages of scale and arbitrage factors aimed at creating pure global Laissez-faire markets. It may leave China cornered as globalisation’s last major defender.
Trump’s promise to curb mass immigration will in fact greatly affect nations like India, especially in the IT sector. He will intensify the trade agenda from his first term’s blanket 10 per cent tariffs on imported goods and even higher levies on China. It will lead to retaliatory duties from trading partners around the world.
India suffered in Trump’s first term from tariff hikes on several exports to the US Trump may further enhance the tariffs on Indian exports, such as textiles, pharmaceuticals, and IT services. Indian corporate giants such as TCS, Infosys, and Wipro, all heavily dependent on the U.S. market, could be seriously impacted by restrictions on outsourcing or higher tariffs.
On the other hand, Trump may initiate tax cuts or other incentives, as he did in his earlier term, to expand America’s corporate engagement with India.
It would also benefit Indian exporters.
During Trump’s previous administration, India lost its Generalized System of Preferences (GSP) status, which had allowed tariff-free exports of goods in certain areas to the US. It has and will impact sectors like pharmaceuticals, textiles, and engineering goods.
Further, if the Trump administration imposes restrictions on work visas, particularly the H-1B, Indian technology and services sectors may result in increased costs. H-1B visa restrictions will seriously impact Indian IT companies operating in the US.
Trump’s interest rate and monetary policy regimes will be keenly watched as a strong dollar, sparked by rate hikes will lead to greater outflows from India, as investors seek higher returns in the U.S. even as the Indian rupee depreciates against the dollar, benefiting exporters, but raising import costs for oil and other essential commodities, while driving inflation in India.
A strong dollar will also raise the cost of servicing dollar-denominated debt. It will also negatively impact foreign institutional investments (FIIs) in Indian equities and bonds. However, in all the feared outcomes of a Trump reign, a significant allowance must be made for his eccentricities and individualistic approach to issues that call for a nuanced approach.
Further, beneath the bluff and bluster of the second Trump era, his true calling as a shrewd businessman could surface and swamp the cautious traditional approach to geopolitics. It is this aspect of his character — of a shrewd businessman seeking immediate profit from populist policies — lies the deep fault lines of a Trump reign.
What could however possibly mitigate his penchant for shortsighted populist gains is his newfound ally — arguably the world’s richest man, Elon Musk. Joining forces with Musk may provide the Administration with a more imaginative, innovative long-term vision for the US in engaging with the world and living up to its self-professed claim to being the ‘leader of the free world.’
Musk could therefore provide a complimentary balance of sober reflection to the Trump Presidency. But, as in every analytical appreciation of this Presidency, an equal and opposite case can also be made.