Implication of election of Trump as President on Indo-USA relations

Oinam Nabakishore Singh *

In a closely contested election of the President of USA, former President Donald Trump emerged victorious on the 6th November, 2024 after the votes were counted. Democrat nominee, Kamala Harris, Vice President made strident efforts to convince voters in the seven swing States of Pennsylvania, Michigan, Nevada, Wisconsin, Georgia, North Carolina and Arizona by addressing several rallies.

However, Donald Trump was able to win all swing or battleground States clinching victory for himself and his Vice President candidate, JD Vance. Oft-repeated refrain of Donald Trump was “Make America Great Again” and “America First”.

Voters belonging to rural areas and working class in the USA, who have been struggling high cost of living in the aftermath of the lockdown of Covid-19 and high rate of inflation in the last four years were looking for a change in the Government of democrats with Joe Biden at the helm of affairs and voted in favour of Republican, Donald Trump. The promise of making America great again means to improve the life of Americans through better jobs, higher wages and better standard of living.

While traditionally working class has been aligned with the liberal democrats for a long time, it seems that they are disillusioned with the economic policies and higher cost of living. In fact, due to high inflation, the actual earning of the workers in the USA has been on the decline making it difficult to make both ends meet.

In his first term, Donald Trump resorted to more protectionist approach in trade relations with China and the European allies. Trump imposed 25% tariff on steel imports and 10% tariff on aluminium imports in 2018 when he was President. He is now talking about imposing a 10% or higher tariffs on all goods imported to the USA, while higher tariffs are proposed on imports from China. He is looking at bridging the trade deficit by raising tariffs.

Since the importer firms would pass on the higher tariffs to American consumers, there would consequen- tly be higher inflation making the lives of consumers worse off. Will it be possible to offset the higher prices of goods with higher collection of taxes by the Government through higher tariffs ? The answer is no as there is no way for the Government to subsidize the price of imported goods.

The United States of America is India’s second largest trading partner after China. In terms of India’s export, it is the biggest destination. Bilateral trade between the two countries touched US$128.78 billion in financial year 2022-23. Of this volume, India’s export to the USA accounted for US$ 78.54 billion while USA exports to India was US$ 50.24 billion.

Major exported items from India to the US include pearls, semiprecious, and precious stones (US$ 9.20 billion); followed by drug formulations and biologicals (US$ 6.77 billion), petroleum products (US$ 6.03 billion), gold and other precious metal jewellery (US$ 3.32 billion), and RMG cotton including accessories (US$ 3.12 billion), among others in FY23.

India’s imports from the US include petroleum: crude (US$ 10.18 billion); followed by pearls, precious, and semi-precious stones (US$ 5.38 billion), coal, coke, and briquettes etc. (US$ 3.76 billion), petroleum products (US$ 3.18 billion), and gold (US$ 1.88 billion), among others in FY23. (Source: https://www.ibef.org/indian-exports/india-us-trade).

While there has been visible display of personal friendship between Prime Minister Narendra Modi and former President, and now President elect to be the 47th President of USA, Donald Trump, the latter had decried the high tariff imposed by India and called India “tariff King”. It is expected that there would be pressure on India to lower tariffs on export of goods to India by the USA.

In case India fails to lower tariffs, USA will impose higher tariffs on Indian exports to USA, which may render Indian goods less competitive. On the other hand, USA will be imposing much higher tariffs on Chinese goods in its efforts to decouple from China and scuttle its economic growth through exports. Such steps may provide an opportunity for India to export more goods to the USA to replace China’s goods.

Customs duty on import of cars to India varies between 100% for cars costing above US$40,000 and 60% for cars costing less than US$ 40,000. There were efforts by Tesla of Elon Musk to export electric cars to India in the past. Because of high customs duty, it was found to be non-competitive.

Now, with Donald Trump in Oval Office from January, 2025, there may be pressure on India to lower customs duty on import of cars to facilitate export of Tesla cars to India. India should look at the huge market of the USA for Indian goods in the long term and may accommodate import of electric cars in overall interest of environment and encourage compe- tition.

United States of America sees India as an ally in countering the growing military power of China in the Indo- Pacific region. The long term relationship between Pakistan and USA especially in economic and military ties have not sustained after the USA withdrew from Afghanistan. On the other hand, there has been deepening of economic and strategic ties between Pakistan and China.

Lending by China to Pakistan to construct China Pakistan Economic Corridor (CPEC) including Gwadar port under the Belt and Road Initiative (BRI), new silk road, has given the much needed connectivity between western China and Pakistan. The ties between the two countries could include military cooperation in future.

Over the last two decades the US has become a significant supplier of defense equipment to India, become India’s largest military exercise partner, taken steps to improve inter-operability and coordination, and signed technical agreements to further expand India’s access to high-end American defense technology. Beyond bilateral cooperation, the United States and India are key partners in “The Quad,” an emerging strategic partnership between the Governments of India, Japan, Australia, and the United States. (Source: https://www.csis.org/programs/chair-india- and-emerging-asia-economics/projects/us-india- defense-relations).

The new regime under Donald Trump will see more defence cooperation with India including making technology and military hardware available to Indian defence forces. With growing size of India’s economy, which is the fifth largest in the world now, India is already seen as an important player in international affairs.

India’s leadership in G-20 summit in 2023 was appreciated well by all. India is an important member of BRICS grouping, which may help in shaping future international order including in de-dollarization. Being the largest democracy with free press and rule of law, USA sees India as a natural ally. A large number of CEOs of the multinational companies in the USA are of Indian origin.

Indian diaspora in the USA are playing important roles in the economy and politics of that country. India too needs American technology in several areas like space exploration, making of fighter jets and acquisition of latest know-how in military hardware. The foreign policies of the new regime in the USA under Donald Trump will boost relationship with India in several areas, which are mutually beneficial to both countries.

Volume of trade will increase manifold. Defence and strategic cooperation through QUAD and other arrangements will streng-then ties. To counter the influence of China, cooperation between India and the USA will be given additional boost. Decisive action to end the wars in the middle east and Europe by the USA will help in bringing peace in the regions, and help India to pursue its vision of leadership in the global arena.