With Donald Trump winning the US presidential election, India closely watches developments, as strong US ties are crucial for its trade, security, and geopolitical interests.

Donald Trump Wins US Elections 2024, Returns as 47th US President

• Mr. Donald Trump has won more than the required 270 Electoral College votes to become the U.S.’s 47th President. 
• The 2024 election marks his second successful presidential run after first securing the presidency in 2016 and serving as 45th president of the United States from 2017 to 2021.
• Trump, at 78 years old, will make history as only the second US president to serve non-consecutive terms, joining Grover Cleveland, who served as the 22nd and 24th president of the United States.

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Background: Key Aspects of Trump’s First Term (2017–2021)

• Visa Issues: During his first term, Trump imposed stricter regulations on the H-1B and L1 visa programmes under his executive order , titled “Buy American and Hire American”.

• • Denial rates for both H-1B and L-1 visas saw a significant rise.
  • The H-1B denial rates  increased from 4% to 17%, and L-1 denials rose from 12% to 28%.
  • This had an impact on India’s IT service companies, which were especially reliant on these visas at the time.
    • H-1B Visa: Allows U.S. employers to hire foreign professionals in “specialty occupations” that require specialised knowledge and at least a bachelor’s degree or equivalent experience.
    • L-1 visa: This visa is meant for intra-company transfers, allowing multinational companies to transfer employees from their foreign offices to U.S. offices.
• Withdrawal from International Agreements and Reduced Fundings:
  • Paris Climate Agreement: Trump withdrew the U.S. from the Paris Climate Agreement, arguing it was unfair to the U.S. economy.
  • Iran Nuclear Deal: The U.S. pulled out of the 2015 nuclear deal with Iran, re-imposing sanctions, which escalated tensions in the Middle East.

• • Trans-Pacific Partnership (TPP): Trump withdrew from the TPP, a trade pact with countries in the Asia-Pacific region, which he argued was disadvantageous to the U.S.
  • He axed funding for several UN agencies and pulled out of the World Health Organisation.
• Economic Protectionism and Trade Wars: Trump pursued an “America First” trade policy agenda focused on strengthening American industries and jobs. 
  • The US imposed tariffs on countries like China, the European Union, and others. 
  • The goal was to reduce the U.S. trade deficit and protect American jobs, though it led to tensions and trade wars.
  • Emphasised fair trade, limited immigration, and job training to protect American jobs and wages.
• Tax Cuts: One of Trump’s significant achievements was the Tax Cuts and Jobs Act of 2017, which slashed corporate tax rates from 35% to 21% and provided tax cuts for individuals.
  • During the 2024 presidential campaign, Trump proposed an additional reduction in the corporate tax rate for U.S.-based manufacturing, aiming to lower it from 21% to 15%. 
• Immigration:  His administration also took a tough stance on illegal immigration, including
  • Separating families at the border,
  • Ending programs like DACA (Deferred Action for Childhood Arrivals), which protected undocumented immigrants who came to the U.S. as children,
  • Pushed to build a wall in the U.S.-Mexico border
• Geopolitical Stance: 
  • West East: 
    • Pro Israeli Policies defined his West Asia Policy during his first term of Office.
    • He moved America’s embassy to Jerusalem.
    • He had also recognised Israel’s Illegal annexation of Syria’s Golan heights. 
    • He unveiled a ‘Peace Plan’ for Israel-Palestine in 2020, but it was outrightly rejected for being heavily in favour of Israel.
  • China: He took a confrontational stance towards China. 
    • Example: US banned Huawei’s 5G mobile devices in 2018.
  • North Korea: He made headlines for engaging with North Korean leader Kim Jong-un in unprecedented summits, aiming for denuclearization, though these efforts did not yield lasting results.

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Present India and US Relations

• India’s Trade Surplus with the U.S.: India is the only country among US’s top five trading partners with which it has a trade surplus of $36.74 billion. 
  • The U.S. is India’s second-largest trading partner, accounting for $118.3 billion in trade.
• Limited U.S. Export Share: Despite being one of India’s top 10 trading partners, the U.S. accounts for less than 3% of India’s total exports.
• Key Source of FDI: The U.S. remains the largest source of Foreign Direct Investment (FDI) for India, contributing $103 billion in the last fiscal year.

Reasons for Positive Outlook for India-U.S. Ties Under Donald Trump Second Term

• Defence and Strategic Relations
  • The China Challenge for the US and India: Trump’s administration was the first to label China as a “strategic threat,” encouraging a coalition to counter Beijing’s influence, including the formation of the Quad in 2017.
    • India, which shares about 3,488 kms of disputed border with China, closely monitors this stance.
  • Expansion of U.S. Military Hardware: The Trump administration is likely to make more U.S. military hardware available to India, boosting defence cooperation between the two countries.
  • Support on Khalistani Groups: Trump might take a strong stance against Khalistani groups, potentially leading to a crackdown on such organisations.
• Trade and Economic Relations: 
  • Strengthening Trade Ties: Trump is expected to continue building on his positive relationship with India, enhancing trade ties and increasing opportunities for Indian companies, particularly in technology and defence.
    • Example: There is a possibility of India replacing Chinese imports in the US market as during the 2024 presidential campaign, he proposed for a significant 60% tariff on goods from China.
  • Renewed Free Trade Agreement (FTA) Negotiations: Trump plans to pick up negotiations for a Free Trade Agreement, which were intense in 2019-2020 but stalled after his presidency ended, and which Biden showed little interest in pursuing.
  • Energy Cooperation: Rather than pressuring India on carbon emission cuts, Trump is likely to encourage India to invest in U.S. oil and LNG. 
    • This includes revisiting the Memorandum of Understanding (MOU) for the Driftwood LNG plant in Louisiana, which could bring significant investment from India.
• Improved FPI Investments to India: India’s position as a strategic U.S. partner against China could bolster its appeal to foreign investors. 
  • According to some analysts, India’s favourable demographics and structural stability projects it as a safer investment destination compared to China’s slowing growth and economic challenges
• Human Rights and Diplomacy: 
  • Reduced Scrutiny on Human Rights: Trump has been non-commentative about the human rights record in India.
    • Example: After the abrogation of Article 370 in Jammu and Kashmir or the Pulwama terror attacks, Trump had supported India’s ‘right to self-defence’. 
  • Less Concern Over NGOs and Foreign Contributions: US will likely not raise concerns regarding the treatment of climate and human rights NGOs affected by the Foreign Contribution (Regulation) Act, 2010, though Republican Congressmen may inquire about U.S. Christian NGOs operating in India.
  • No Diplomatic Concerns with Canada: Given Trump’s past strained relations with Canadian Prime Minister Justin Trudeau, India would likely not face any diplomatic pressure from Washington over its ongoing tensions with Ottawa, particularly regarding the Nijjar killing.
    • Allegation by Canada: Canada announced in parliament that there were “credible allegations” linking India to the assassination of Hardeep Singh Nijjar, a Sikh separatist leader, in British Columbia in June.
    • India’s Response: India dismissed these allegations as “absurd” and urged Canada to address anti-India activities within its borders, specifically targeting pro-Khalistan groups.
• Others:
  • Trump’s Green Card Proposal: Trump’s plan to grant automatic green cards to foreign graduates of US colleges could create new opportunities for Indian students, making it easier to stay and work in the US.
  • Pharmaceuticals: Could lead to improved pricing for Indian generic firms. 
    • Deregulation may increase penetration of Indian generics into the US market.
  • Stocks and Bitcoin: Trump’s victory was met with enthusiasm from investors worldwide. 
    • The S&P 500 surged over 2.5%, marking its largest intraday gain in two years. This optimistic momentum also lifted Indian markets, with the Nifty 50 and Sensex rising over 1% each.
    • Bitcoin surged to a record high of more than $75,000, as crypto investors celebrated the return of Trump, who had earlier pledged to make the US “the bitcoin superpower of the world”.

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Potential Challenging Issues for India-U.S. Ties Under Trump’s Second Term

• Focus on Reducing Trade Tariffs: The Trump 2.0 administration is expected to push for an ‘America-first strategy’ that will penalise countries that put high taxes on American products and services.
  • For India, increased tariffs could challenge industries like IT, pharmaceuticals, and textiles that rely on the US market.
  • Trump has been quite vocal against India placing high tariffs on American products. 
  • Example:
    • In his first term, He had openly asked India to reduce tariffs on Harley Davidson bikes. 
    • He badgered India to lift the ban on Hydroxychloroquine exports.
• World Trade Organization (WTO) Complaints: The Trump administration’s tendency to file complaints with the WTO could create tensions if India’s trade policies or practices are targeted under his administration.
  • Trump previously accused India of being a “major abuser” in trade relations, highlighting tariffs and trade imbalances.
• Revocation of GSP Status: During the Trump administration’s first term, India lost its preferential trade status under the Generalised System of Preferences (GSP), impacting approximately 12% of its exports. 
  • This may continue to be a point of contention, affecting India’s preferential access to U.S. markets.Immigration : A Trump 2.0 administration would likely reinforce strict measures against illegal immigration, affecting the return of illegal Indian immigrants.
  • India has maintained that they do not support illegal immigration from India.
  • However, Mass deportations could present optical challenges for India if many Indian nationals return.

• Geopolitical Help: India will also seek US intervention in ending Israel’s war in Gaza and Lebanon and reopening talks with Gulf Countries, to help revive its plans for the India Middle East Europe Economic Corridor.

Potential Economic Implications

Potential Geopolitical Implications

• Support for Israel in Middle East Conflicts: Trump has shown strong support for Israeli Prime Minister Netanyahu, especially in the ongoing Israel-Gaza conflict. 
  • He has privately endorsed Israel’s aggressive actions against Hamas and Hezbollah and may encourage further expansion of Israel’s policies in the region.
  • But he does not want the expansion of war in West Asia as:
    • A larger war with Iran could affect energy supplies through the Strait of Hormuz that connects the Persian Gulf to the Arabian Sea. 
    • This can enhance the inflationary pressures.
    • For political, strategic and economic reasons a wider war is not in the interest of the Trump administration. 
• China: Trump has threatened to raise tariffs on Chinese imports by up to 60%, which could lead to a significant trade war.
  • This could reduce China’s economic growth by more than 2% next year, according to analysts.
  • To counteract this, China might introduce a larger fiscal stimulus package, possibly amounting to 2-3% of its GDP annually over the next few years to boost its economy.
• Pakistan: During his last tenure, Trump had cancelled most of the U.S aid to Pakistan.
  • Pakistan is worried about losing U.S support on loans from the International Monetary Fund (IMF) and World Bank as well. 
• Nepal, Bhutan and Maldives: The Biden Government had expanded its outreach to these countries. 
  • However, the level of attention given to these countries by the Trump administration is to be seen.
• Bangladesh: Trump had commented on the protection of Hindu Minorities in Bangladesh.
• Concerns Over Immigration Policies: Trump plans aggressive immigration policies, including deporting millions of immigrants. 
  • He has also threatened tariffs on Mexico unless the country does more to curb migration. 
  • This could strain the U.S.-Mexico relations and have devastating effects on both economies due to the interconnectedness of trade and migration
• Climate and Multilateral Agreements: The future of the 2015 Paris Agreement on climate change which America had rejoined under President (Joe) Biden will come under strain now.
  • Trump’s scepticism about climate change could hinder global cooperation on environmental issues.

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Way Forward

• Strategic Alignment in Indo Pacific:  In a second Trump term, further emphasis on Quad  (India, the U.S., Japan, Australia) initiatives could reinforce India’s role as a key player in maintaining stability in the Indo-Pacific region. 
  • By enhancing military cooperation, the US and India can jointly address China’s assertive policies, underscoring their commitment to a free and open Indo-Pacific.
• Counterterrorism: It has been an area of shared interest for India and the US.
  • During Trump’s first administration, his “Peace through Strength” doctrine aligned well with India’s security priorities, particularly concerning Pakistan.
  • India and US partnership could strengthen joint efforts to counter terrorist threats and address extremism. 
• Strengthen People-to-People Ties: Facilitate Visa and Immigration Reforms to support the Indian diaspora and professionals in the U.S., emphasising the contributions of Indian talent to the U.S. economy.
• Defense Procurement and Joint Ventures: Accelerate defence procurements from the U.S. and explore joint production ventures under India’s Make in India initiative.
• Negotiating a Trade Package: Work toward resolving trade disputes by offering concessions in areas of interest to the U.S., such as pharmaceuticals and agriculture, while seeking reductions in tariffs on Indian exports.

Conclusion

India and the US have the potential to redefine bilateral ties based on mutual economic growth, security, and strategic interests in an increasingly complex global landscape.

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