Republicans have won control of the US Senate with victories in West Virginia and Ohio on Tuesday, ensuring Trump’s party will control at least one chamber of Congress next year. Republicans also posted early gains as they battled to retain control of the House of Representatives. if they prevail, Republicans would be in a position to dictate the agenda in Washington, helping Trump deliver on his key promises. Trump’s agenda to impose high tariffs and restrict immigration will unroll without any hindrance.
While Trump could be favourable for India overall, his tough stance on trade and visas can prove to be negative for India.
Trade under Trump
Trump will pose a big challenge to still-evolving efforts by several countries to carry out bilateral trade in local currencies. There has also been the talk of BRICS currency. India has benefited a lot in local currency trade with Russia. However, the US has taken a strong notice of that. India and Russia are exploring the idea of a dynamic reference rate to start a rupee-rouble market, along with allowing greater deployment of the rupee balance that has accumulated in course of trade between the two countries since outbreak of the Ukraine war. A reference or exchange rate is aimed at overcoming the dollar trade barriers raised by US sanctions imposed on Russia in February 2022. Rupee payments for Russian imports have exceeded India’s exports to Russia. India and the UAE already have a mechanism for settlement of trades in non-dollar currencies.
Russian Ambassador to India Denis Alipov said recently that USA’s meticulous tracking of transactions and threats of secondary sanction on Indian banks is the main problem in trade involving direct exchange in rupee and ruble.Two months ago, Trump announced his intention to impose a 100% tariff on goods from countries that move away from using the US dollar in international trade. This proposal forms part of Trump’s broader strategy to counter efforts by China, India, and other nations to de-dollarise their trade. “If you abandon the dollar, you’re not doing business with the United States because we will impose a 100 percent tariff on your goods,” Trump declared during a rally in Wisconsin.During his first term as president, Trump labelled India a “tariff king”. In an interview last August, Trump criticised India’s tax rates, asserting that they were excessively high. In 2019, India had imposed retaliatory tariffs on several U.S. products. This was in response to Washington’s refusal to exempt Delhi from increased taxes on steel and aluminum imports. Trump, in his last stint as the US president, had also withdrawn India’s preferential trade treatment amid tariff dispute. Trump, back then, had also threatened sanctions if India proceeded with purchasing oil from Iran or moved forward with its plans to acquire Russian S-400 anti-aircraft missiles. As president, Trump had raised the issue of high tariffs on Harley-Davidson motorcycles. The iconic Harley-Davidson motorcycle became a key reference point for Trump when criticising what he perceived as an imbalanced trade relationship with India. In September, Trump called India a “very big abuser” of tariffs, while calling Prime Minister Modi a “fantastic man”.
The US is the largest destination for Indian merchandise exports. In 2023-24, imports into India from the US amounted to $42.2 billion, while exports from India were valued at $77.52 billion. High taxes on Indian exports can impact India’s economic growth.
However, his strong statements on tariffs could be populist rhetoric and may not turn out to be as harsh as he has promised. Swaminathan Aiyar, Consulting Editor, ET Now, has said in a recent interview, “Mr Trump says all kinds of scary things and then within 48 hours he will say something even scarier and then he will contradict himself. So, at the end of it all, nobody is 100% sure what Mr Trump has in his mind and he delights in himself changing. I mean, he started off with the position of saying a 10% flat duty on everybody. Now he has gone and said 20%. In the case of China, he first said 60% tariffs. Then he said 100%.”
Trump has floated the idea of a 10% or more tariff on all goods imported into the US, a move he says would eliminate the trade deficit. But critics say it would lead to higher prices for American consumers and global economic instability.
Trump’s tariff policy could also benefit India indirectly. As per a recent report by PhillipCapital, his anticipated push for higher tariffs on Chinese goods could create opportunities for Indian sectors such as textiles, auto components, and consumer electronics, enhancing their competitiveness in the U.S. market. This shift could also encourage foreign direct investment (FDI) flows towards India as companies seek alternatives to China for manufacturing and investment.
Immigration under Trump
Trump had put the issue of immigration at the centre of his poll campaign. A report by JM Financial has noted that if Trump were to regain power, his administration’s previous restrictive policies could resurface, potentially leading to increased scrutiny and denial rates for H-1B and L-1 visas.
During his first term, initial denial rates for H-1B visas surged from 4 per cent to 17 per cent, while L-1 visa denials rose from 12 per cent to 28 per cent. This trend could re-emerge, impacting IT services firms that heavily rely on these visas.
However, the landscape has changed since Trump’s first term. Many IT services companies have significantly reduced their dependency on H-1B visas, with estimates suggesting that the ratio of visa-dependent employees has flipped from 65 per cent to below 50 per cent in recent years. This shift insulates these firms from potential spikes in denial rates, as they have increasingly localized their workforce in the US. Some if India’s IT business might be forced to shift to other countries.
Trump’s administration previously attempted to implement policies that would raise minimum wage requirements for H-1B visa holders, pricing some employers out of the market. Although these measures were blocked in court, they could serve as precursors to future restrictive policies if Trump returns to office. Current analyses indicate that H-1B wages are already 25-35 per cent above prevailing wages, making claims of wage suppression difficult to substantiate.
However, Trump’s tough stand on citizenship can spell trouble the big Indian diaspore in the US. Trump has promised to end automatic citizenship for children. The plan is not just for children born to illegal immigrants. The draft executive order reads, “It will direct federal agencies to require that at least one parent be a US citizen or lawful permanent resident for their future children to become automatic US citizens.”
Immigration attorneys have told TOI that Trump’s plan will certainly be litigated as it violates the 14th Amendment. If passed, it spells a huge set-back for the Indian diaspora. According to an analysis of the US Census (2022) done by Pew Research, US was home to about 4.8 Indian Americans, of whom 34% or 1.6 million were born in the US.
(With inputs from TOI and agencies)
