US Elections & Impact On India

Impact on Indian Exports

• Pharmaceuticals and IT Services: Indian pharmaceutical exports to the U.S. could face challenges, particularly due to a likely hardening of Trump's stance on H-1B visas, which may lead to increased rejections and affect profits for Indian IT services firms that rely heavily on skilled labor from India. The expectation is that Trump's administration may impose higher tariffs on goods exported from India, potentially affecting sectors like pharmaceuticals and textiles, which are crucial for India's economy.
• Trade Balance: The U.S. is India's largest trading partner, with bilateral trade reaching nearly $120 billion in FY24. This relationship is favorable for India, as the U.S. accounts for about 18% of India's total exports, a significant increase from 10% in 2010-11. However, Trump's previous rhetoric labeling India as a "trade abuser" suggests that he may seek to renegotiate trade terms unfavorably for India.

Tariff Policies and Economic Effects

• Increased Tariffs: Trump's administration is expected to revive protectionist policies, including imposing higher tariffs on Indian goods. During his first term, he imposed significant tariffs on steel and aluminum imports from various countries, including India, under national security provisions. Similar measures could be anticipated again, which would likely strain India's export sectors.
• Inflation Concerns: The Peterson Institute for International Economics has projected that Trump's economic policies could lead to increased inflation in the U.S., potentially rising consumer prices significantly. This inflation could adversely impact Indian exports of labor-intensive goods such as textiles and leather products, which are sensitive to price changes in the U.S. market.

Strategic Opportunities Amid Challenges

• Decoupling from China: While Trump's policies might pose challenges for Indian exports, they could also create opportunities. A renewed focus on decoupling from China could lead U.S. companies to seek alternative manufacturing bases in India, especially if tensions between the U.S. and China escalate. This shift could enhance India's position as a manufacturing hub.
• Investment Flows: During Trump's first term, U.S. foreign direct investment (FDI) in India increased significantly. If Trump maintains a favorable view towards India as a strategic partner against China, this could support continued investment flows into critical sectors.

Strengthened Defence Ties

• India’s defence relationship with the US is expected to remain robust and grow stronger, driven by shared interests, particularly concerning China. Experts highlight the importance of this partnership for maintaining a free and open Indo-Pacific region.

Bipartisan Support

• Both the Trump and Biden administrations have been equally supportive of India, contributing to approximately $15 billion in arms deals over the past eight years. This bipartisan support underscores the strategic significance of the India-US defence partnership.
• Inflation Concerns: The Peterson Institute for International Economics has projected that Trump's economic policies could lead to increased inflation in the U.S., potentially rising consumer prices significantly. This inflation could adversely impact Indian exports of labor-intensive goods such as textiles and leather products, which are sensitive to price changes in the U.S. market.

Key Arms Sales

• During Trump's previous term, several notable arms sales were made to India, as detailed in the table below:

Increase in Arms Imports

• India’s share of global arms imports rose to 9.8% between 2019 and 2023. Additionally, the US's share of India’s arms imports increased from 8% two decades ago to 13% in 2023, reflecting a growing reliance on American defence technology.

Defence Agreements

• Two critical defence agreements-Communications Compatibility and Security Agreement (COMCASA) and Basic Exchange and Cooperation Agreement (BECA)-were signed during Trump’s presidency. These agreements enhance military cooperation and interoperability between the two nations.

Strategic Trade Authorization

• Trump elevated India to Strategic Trade Authorization (STA-1) status, allowing access to sensitive technologies previously reserved for NATO allies. This status is expected to facilitate deeper defence collaboration.

Potential Benefits

• Experts suggest that under Trump’s leadership, India may see additional benefits, such as a reduction in conflicts related to terrorism and a potential halt to the Khalistan movement. This could further stabilize regional security dynamics.

Need for Reciprocity

• Former ambassador Jayant Dasgupta emphasizes that while defence ties have been robust, they should not be one-sided. India should also focus on exporting defence products to balance the relationship. The US accounted for nearly 50% of India's $2-2.5 billion defence exports in FY24.

Challenges Ahead

• While defence ties are strong, challenges such as trade issues and India's non-aligned stance could create friction in the relationship moving forward. Navigating these complexities will be crucial for sustaining and enhancing the partnership.This structured summary provides a comprehensive overview of the evolving India-US defense relationship in light of Donald Trump's presidency, highlighting key aspects in both paragraph and table formats for clarity.

• Shashi Tharoor, chairperson of the Parliamentary Standing Committee on External Affairs, raised concerns about immigration and trade following Donald Trump's return to power. He described Trump as having a "transactional attitude," indicating that interactions would focus on mutual benefits. Tharoor warned that Trump's tough stance on trade could lead to retaliatory tariffs if India raises its tariffs, impacting Indian exports.
• He also noted potential challenges in immigration, suggesting that legal immigration numbers might decrease, affecting family reunification for Indian nationals. However, Tharoor acknowledged that Trump's strong position against China could align with India's interests, providing opportunities for cooperation.

• With Donald Trump projected to return as US President, analysts expect a positive shift in America-India relations, largely due to Prime Minister Narendra Modi's strong rapport with Trump. This could complicate matters for Canadian Prime Minister Justin Trudeau, whose relationship with India has deteriorated following his accusations linking India to the killing of Khalistani separatist Hardeep Singh Nijjar.
• Trudeau's call for an investigation into alleged Indian involvement has strained diplomatic ties, leading to suspended trade negotiations and the expulsion of Canadian diplomats by India. Experts suggest that Trump's presidency may strengthen Modi's position, enhancing India's global influence.
• Patrick Brauckmann predicts Modi will likely be among the first world leaders to visit Washington under Trump. Modi congratulated Trump on his election victory, expressing eagerness to renew collaboration.
• Trudeau faces a precarious situation, with commentators warning that his strained relationship with India could lead to political and diplomatic isolation. Some suggest Canada may benefit from a leadership change to better navigate relations under Trump. Overall, the rift between India and Canada could impact trade and immigration ties significantly.

Ukraine Conflict

• Trump claims he could quickly end the Ukraine war, emphasizing his "good relationship" with Vladimir Putin. However, he has not detailed how he would achieve peace or address Ukraine's territorial integrity, potentially straining U.S.-European relations if his terms are unfavorable to Ukraine.

Middle East Peace Efforts

• Trump has historically backed Israel and its military actions, aligning closely with Prime Minister Benjamin Netanyahu. His administration facilitated the Abraham Accords, normalizing relations between Israel and several Arab nations. However, his approach may lack credibility with Palestinian leadership.

Geopolitical Dynamics

• Strengthened US-India Relations: Trump's close relationship with Prime Minister Narendra Modi may enhance India’s standing in South Asia, potentially affecting neighboring countries like Pakistan and China. Trump's administration is likely to continue its focus on countering Chinese influence, aligning with India's strategic interests.
• Impact on Pakistan: Trump has previously indicated a willingness to engage with Pakistan but has emphasized accountability in counterterrorism efforts. His administration may maintain pressure on Pakistan regarding its role in regional terrorism, which could strain Islamabad's relations with Washington.

Trade Relations

• Tariffs and Trade Policies: Trump’s protectionist stance may lead to renewed scrutiny of India's trade practices. He has criticized India for high tariffs and could push for reciprocal tariffs if he perceives unfair trade practices. This could affect India’s export viability and economic relations with its neighbors.
• Economic Opportunities for India: Trump's "China Plus One" strategy might encourage US companies to diversify supply chains, potentially benefiting India as an alternative manufacturing hub.

Immigration Policies

• H-1B Visa Restrictions: Trump's previous administration implemented strict immigration policies that affected Indian professionals, particularly in the tech sector. If similar policies are reinstated, it could limit opportunities for skilled Indian workers, impacting the Indian diaspora and tech firms reliant on this talent.
• Regional Workforce Dynamics: Stricter immigration laws could push Indian tech firms to explore other markets or invest more domestically, altering workforce dynamics in neighboring countries that rely on Indian talent.

Regional Tensions

• Bangladesh and Sri Lanka: Trump's foreign policy may also influence India's relations with its immediate neighbors like Bangladesh and Sri Lanka. His administration's stance on issues such as human rights and regional stability could affect diplomatic ties.
• China's Response: China's reaction to a Trump presidency could further escalate tensions in the region, especially if the US continues to strengthen its military partnerships with India and other countries in the Indo-Pacific.

Demographic Significance

• Indian Americans number over 5.2 million, representing approximately 1.5% of the U.S. population.
• The Indian American population grew by over 50% between 2010 and 2020, making it the second-largest immigrant group in the U.S.
• The median household income for Indian Americans is significantly higher than the national average, indicating strong socioeconomic status.

Political Trends

• Historically, Indian Americans have leaned heavily Democratic; however, Democratic identification has declined from 56% in 2020 to 47% in 2024.
• A noticeable shift towards Republican candidates is evident among younger voters, particularly young men, who increasingly support figures like Donald Trump.
• Key issues for the community include economic concerns and immigration policies.

Engagement Strategies

• Both major parties actively court Indian American voters, with targeted campaigns aimed at addressing their specific interests.
• The Trump campaign engages young Indian men through popular media and messaging focused on economic stability and strong U.S.- India relations.
• Organizations like Indian American Impact mobilize grassroots support for Democratic candidates, particularly Kamala Harris.

Election Impact

• Polling indicates that about one in three Indian Americans may vote for Trump in 2024, suggesting potential swing votes that could influence tight elections.
• The visibility of candidates like Kamala Harris has increased political interest and participation within the Indian American community.
• Greater activism among Indian Americans is fostering engagement in the electoral process.

Some Questions from This Year and Previous Years Interview Transcripts