The return of Donald Trump to the presidential chair in the 2024 US elections will likely have far-reaching results in international trade relations between India and the USA. This is due to his known business tactics. In the first year of his presidency, a systematic framework that emphasized ‘American first’ became the thrust of Trump’s foreign policy. Economic dominance was a major goal; however, this stance negatively impacted international relations and agreements. He paid no regard to the US commitments in international conventions and agreements such as the Paris climate accords or the Iran nuclear agreement and set high rates of casts for numerous imports, including Chinese and Indian goods. Trade policies implemented by Donald Trump were aimed at addressing the trade balance by ensuring that the US has a clear upper hand in trade.
One area where a Trump presidency would likely impact India-US ties is trade, as he has consistently criticised countries, such as India, to apply excessive tariffs on American goods. He mentioned that tariffs on Indian goods are the highest among major global tariffs and introduced measures for the imposition of ‘reciprocal taxation’ to win the elections. The logic behind this reciprocal tax is that the US would impose taxes on Indian imports if India continued to impose high taxes on American exports. In his own words, using China as an example, Trump mentioned “India is a very big charger…We have a great relationship with India…but they probably charge as much.” This clearly demonstrates his attitude towards the Indian market. As good as this relationship may be, there are no decent trade policies that would assist American companies. Expect US tariffs on Indian imports to increase pharmaceutical, textile, and IT services; as this policy becomes a possible reality, the key sectors in Indian exports to the US.
However, on the other side, Trump’s relentless drive to disentangle from China may create opportunities for India. Since American companies seek to relocate their supply chains from China to other countries, India has a chance to emerge as an alternative manufacturing center. If Trump held on to his stand that China is an enemy in trade, it would be beneficial to India in the sense that US firms displaced in China seek to invest in new sites of production or new sources. Considering the fact that India already possesses some strengths in the areas, potential opportunities are presented to sectors such as Information Technology, Pharmaceuticals, and Textiles, among others.
Going further to analyze the impacts of Trump’s policies, it is pertinent to note that his economic worldview has its own consequences on the structure of international trade. The call of Trump for ‘reciprocity’ in trade deals may appear to be easy to understand, but has its intricacies for India which has been a net exporting country to the US.The idea of reciprocal taxation can never be understood as just a revenue-earning device but rather as a policy instrument meant to alter the international trade power structure. For India, this could imply a closer look at its export strategies, especially for products that are highly dependent on the U.S. market. Important sectors, such as Pharmaceuticals, Textiles and IT services, which have prospered under the prevailing basic structure of trade, may come under severe constraints for the first time. The existence of reciprocal tariffs would unhinge the existing supply chains, raise costs, and lower relative efficiency, forcing Indian companies to change the markets where they operate, or change their approach to the new international trading scenario.
No level of frivolity or indifference can be incorporated when addressing the issue of tariffs on Indian products and their prospects for being reinstated or increased. In his first term, Trump shook up trade relations by placing tariffs on India’s steel and aluminum imports. Ultimately designed to be protective measures for the US industry, these measures disrupted the trade flows of the world and forced exporters to incur additional costs or make consumers pay for them. If policies of that nature are implemented again, sectors such as automotive parts, machinery, and consumer electronics, which have huge trade with the US, will be at a disadvantage. All of these tariffs taken together would not only create an undue strain on bilateral trade relations but, more importantly, challenge the fundamentals of the Indian economy, which is driven by exports.
In the same context, Trump’s emphasis on bilateral trade agreements creates both opportunities and challenges in equal measures. If multilateral frameworks such as the WTO integrate all member nations into a level playing field system, bilateral agreements suppose the ability of bigger nations such as the US to be stronger at the bargaining chip. For India, doing so would require its political leaders to be more cautious about the practicalities of such agreements. Initiating such an agreement could provide opportunities to collaborate in areas such as advanced technology, defense, and energy. On the other hand, it will, however, require a lot in terms of trade-offs in areas concerning IPR, E-commerce policy, and market access with respect to American goods. Conducting these negotiations will require India to adopt a realistic perspective in which it will utilize its strengths but at the same time defend its economic interests.
Apart from trade, the strategic aspect of Trump 2.0 and India-US relations should also be studied closely. The geopolitical realities within the Indo-Pacific region, increasingly shaped by aggressive Chinese policies under President Xi and the shifting patterns of regional cooperation frameworks, provide a useful context for improved interplay between India and the US. As India also seeks to balance Chinese expansionism, Trump’s position in mainly targeting Chinese expansionism serves as an interest driver for the two nations to work closely together.The emergence of partnerships, such as the Quad and cooperative military activities, examines the relevance of this partnership and offers a broad spectrum of cooperation to be exercised in diverse areas, including counterterrorism and maritime security.
Nonetheless, limitations arise with such an alignment. For example, Trump’s economic policy sometimes places India and China in the same bracket regarding trade deficits. However, his geopolitical vision held India as a useful counterbalance to China’s dominance over Asia. On the one hand, this duality provides opportunities to India, but on the other hand, it poses challenges, as even though Indo-US relations cannot be disregarded, economic stress needs to be managed. The ability to meet this delicate equilibrium depends on enhancing defense relations, increasing intelligence sharing, and fostering cooperation in new areas, including cyberspace and outer space.
Domestically, the political imperatives of both leaders will profoundly influence the trajectory of India-US relations under Trump’s second term. For Donald Trump, catering to his voter base remains paramount, particularly through policies designed to protect American jobs, curb immigration, and reduce trade deficits. These priorities will inevitably shape his approach to bilateral trade and economic engagement, where he will likely seek to extract maximum concessions from India to showcase tangible benefits to his supporters. By imposing stringent trade measures, Trump aims to demonstrate a commitment to revitalizing American industries, which could intensify the economic pressure on India to reform its trade practices. On the other hand, Indian Prime Minister Narendra Modi faces a similar balancing act: upholding India’s domestic economic interests while maintaining a robust strategic and economic partnership with the United States. Modi’s challenge lies in addressing growing domestic expectations for economic growth and job creation while navigating the complex and often unpredictable dynamics of US trade policy. Effective diplomacy and a long-term strategic vision will be essential to ensuring that India does not compromise its broader interests in the face of increased bilateral demands.
The role of Indian investments in the United States becomes even more critical in this evolving landscape. Indian businesses, particularly in technology, pharmaceuticals, and renewable energy, have been instrumental in strengthening economic ties between the two nations. These investments are not just financial commitments but also strategic efforts to integrate into the American economy and showcase India as a vital economic partner. Indian companies are already expanding their footprints in the US by establishing research and development hubs, forging collaborations in clean energy projects, and venturing into frontier technologies such as artificial intelligence and 5G. Such initiatives could act as a counterbalance to any restrictive trade policies Trump may pursue, demonstrating India’s value as an ally in areas of innovation and job creation. Additionally, as the US seeks alternatives to Chinese manufacturing, India could seize this moment to position itself as a reliable partner, further enhancing its reputation as an indispensable player in global supply chains. This dual approach of fostering investments while leveraging geopolitical shifts offers India a path to maintain economic relevance in the face of potential tariff impositions.
In conclusion, Trump’s second term as US President introduces a multifaceted dynamic that presents both challenges and opportunities for India. The looming threat of increased tariffs and protectionist measures underscores the urgency for India to diversify its export markets and enhance its global competitiveness. Moreover, sectors such as pharmaceuticals, IT, and textiles will need to adapt to a potential shift in US trade policy that prioritizes American domestic interests over global partnerships. Yet, despite these economic hurdles, the strategic relationship between India and the US remains a stabilizing force in an otherwise volatile international environment. With shared interests in countering China’s influence in the Indo-Pacific, combating terrorism, and promoting a rules-based global order, the two nations have a strong foundation for collaboration beyond just trade. For India, navigating this complex relationship will require a fine balance of proactive policy measures, economic resilience, and strategic foresight. By aligning its economic and geopolitical priorities, India can ensure that its partnership with the US remains both mutually beneficial and robust, paving the way for deeper cooperation in a rapidly changing world order.