With Donald Trump set to return to the presidency, there is considerable uncertainty surrounding his policies, especially as foreign investors are withdrawing capital from global markets at record levels. According to Nomura, Japan’s leading investment bank, emerging markets are likely to be affected—primarily China—but India stands to benefit the most from this shift.
Moody’s ratings suggest that New Delhi could gain significantly as global power dynamics shift under Trump 2.0. The US accounts for about 18% of India’s merchandise exports, with key exports including electronics, pearls and precious stones, pharmaceuticals, nuclear reactors, petroleum products, and to a lesser extent, iron and steel, autos, and textiles. In addition, India is one of the world’s leading exporters of services, particularly IT and professional services (including global capability centers involved in outsourcing value-added services). The US remains a key customer for these sectors.
Trump’s Top Priorities: Reducing US Debt, Boosting Domestic Manufacturing, and Tackling Illegal Immigration
So, how exactly will Trump’s second term impact India? Let’s break it down.
1. Geopolitical Stability with Reduced Tensions in Ukraine
Trump is likely to reduce US funding to Ukraine and prioritize domestic issues. This could lead to a reduction in global geopolitical tensions, creating a more stable international environment. A reduction in military spending and focus on domestic policies may be more favorable for India, especially in terms of global stability and security, allowing India to focus more on economic growth and regional security issues.
2. Higher Tariffs on China Could Benefit India
Trump has hinted at imposing significant tariffs (60%) on Chinese imports, which would help reduce US debt and incentivize local manufacturing. As a result, businesses looking to avoid high tariffs on Chinese goods could shift their supply chains to India, giving a boost to Indian exports. India could become a key beneficiary of this trade reorientation, particularly in sectors such as electronics, textiles, and automotive components.
3. US Inflation Could Lead to a Stronger Dollar
With higher tariffs and a push for increased domestic manufacturing in the US, inflation in the US is likely to rise. This, in turn, could push the US dollar to strengthen. While a strong dollar may lead to capital outflows from emerging markets, including India, it could also attract more foreign direct investment (FDI) into India as companies seek alternative, cost-effective manufacturing hubs outside of China.
4. Fossil Fuel Focus May Impact India’s Renewable Exports
Trump’s push for more fossil fuel exploration in the US could hurt Indian firms exporting renewable energy equipment like solar panels and wind turbines. With a less favorable regulatory environment for renewable energy in the US, Indian companies in this sector may face reduced demand. However, India’s broader energy transition strategy, focused on solar and wind, could still find opportunities in other global markets.
5. US Crypto Policies Could Offer New Opportunities for Indian Tech
Trump’s pro-crypto stance may create new opportunities for blockchain and decentralized finance technologies. India, which has been cautious about cryptocurrency regulation, could find itself at a crossroads: either embrace crypto innovation or continue to regulate it. Indian tech firms with blockchain capabilities might benefit from the global rise in crypto adoption, though India’s stance will be key in determining how much of this growth they can capture.
6. Stronger US Border Policies and Immigration Crackdown
Trump’s likely focus on curbing illegal immigration in the US could affect Indian IT professionals and students, especially those on H1-B visas. Although this might lead to a reduction in the influx of Indian talent to the US, it could simultaneously open up opportunities for Indian firms to offer outsourced services and tech talent solutions to the US market, as American companies look to diversify their workforce sourcing.
7. Tariff Concessions for Tesla Could Stimulate India’s EV Industry
Trump’s close relationship with Elon Musk could lead to favorable tariff concessions for Tesla’s electric vehicle (EV) project in India. If India opens up its market to Tesla and provides incentives for manufacturing EVs locally, this could accelerate India’s transition to cleaner transportation and make India an EV hub for both domestic consumption and exports.
8. Muted Comments on India-Canada Issues Could Strengthen US-India Ties
Trump’s likely more muted approach to the Indo-Canadian tensions (e.g., the Pannun-Nijjar issue) could reduce friction in India-Canada relations, ensuring that these issues don’t become a major stumbling block in broader India-US ties. This could create a more stable diplomatic and trade relationship between India and the US, fostering stronger bilateral cooperation.
9. Supply Chain Relocation Could Accelerate India’s Rise as a Manufacturing Hub
As companies around the world look to de-risk their supply chains and move out of China, India is well-positioned to benefit from this trend. Trump’s “America First” policies, combined with a push for supply chain diversification, could lead to an accelerated relocation of global manufacturing to India. India’s large consumer market, competitive labor costs, and improving infrastructure make it an attractive alternative to China for multinational companies.
10. Greater Economic Collaboration in Technology and Services
India’s export of IT services, particularly business process outsourcing (BPO), software development, and consulting services, is a critical pillar of the US-India trade relationship. Trump’s “America First” rhetoric may push for more collaborative ventures between US and Indian firms, especially in tech, where India already holds a significant competitive advantage. However, trade policies that favor US manufacturing over outsourcing could lead to adjustments in the way Indian companies operate with their American counterparts, but long-term, India’s digital prowess may continue to drive growth in the services sector.
