As Donald Trump prepares to take office for a second term as the President of the United States, Indian exporters and IT firms are bracing for potential challenges stemming from his “America First” agenda. Trade experts warn that the new administration’s protectionist policies could lead to higher tariffs on key Indian exports, such as automobiles, textiles, pharmaceuticals, and chemicals, while also tightening visa regulations, particularly for Indian IT professionals.
India’s position as the United States’ largest trading partner, with annual trade surpassing USD 190 billion, places it in a vulnerable spot as Trump aims to push for more balanced trade relations. With over 80% of India’s IT export earnings coming from the US, experts predict that any tightening of the H-1B visa rules could significantly impact Indian IT firms, raising operational costs and stunting growth.
Higher Tariffs and Protectionism in Trump’s Second Term
Trade experts, including Ajay Srivastava, Founder of Global Trade Research Initiative (GTRI), suggest that Trump could extend tariffs beyond China to India, introducing reciprocal tariffs on Indian goods. “Trump’s America First agenda would likely push for protective measures, including tariffs on Indian goods like automobiles, wines, textiles, and pharmaceuticals,” said Srivastava. Such measures could diminish the competitiveness of Indian products in the US market, impacting revenue for sectors crucial to India’s economy.
Trump’s previous remarks, such as labeling India as a “large tariff abuser” and the “tariff king” in 2020, suggest a more aggressive stance on trade relations. This could lead to new trade disputes between the US and India, which might further complicate bilateral negotiations.
Impact on Indian IT Sector and H-1B Visa Rules
A significant area of concern for India is the future of H-1B visa policies under Trump. These visas are critical for the movement of skilled Indian IT professionals to the US. Trump’s stricter immigration stance could lead to changes in the rules governing the H-1B visa program, affecting Indian IT professionals and raising the costs for Indian IT companies working in the US.
“Trump’s stricter immigration policies could make it harder for Indian IT professionals to secure H-1B visas, which could increase costs and slow the growth of Indian IT firms,” Srivastava explained. Given that Indian IT firms depend heavily on the US market, changes to the H-1B program could have a significant impact on their profitability and ability to scale operations.
Opportunities Amidst the Challenges
While there are concerns about rising protectionism, some experts believe that Trump’s tougher stance on China may open up new opportunities for Indian exporters. Srivastava noted that India’s increasing demand for advanced technology, energy, and capital goods from the US could create avenues for expanding bilateral trade, especially in sectors like electronics and pharmaceuticals.
Additionally, India’s growing demand for US military equipment, IT services, and Boeing aircraft has boosted trade in services, with projections estimating that trade in services will rise from USD 54.1 billion in 2018 to USD 70.5 billion in 2024. This shift could benefit both Indian exporters and US businesses engaged in India’s rapidly growing markets.
Future of Indo-US Relations Under Trump’s Leadership
The possibility of a “Make America Great Again” (MAGA) agenda that emphasizes protectionism could lead to a reorientation of India’s trade and immigration policies. However, with India emerging as a significant player in global trade and a key partner for the US in sectors such as IT, defense, and energy, both countries may still find common ground in future negotiations.
Experts like Biswajit Dhar, an international trade analyst, suggest that Trump’s “America First” approach will likely continue to affect global trade dynamics. Sectors such as electronics and food products could face higher tariffs, while India may also have to brace for retaliatory measures. “With increasing protectionism, we could see a new phase of trade disputes, but also opportunities in sectors where India’s growth aligns with US interests,” Dhar noted.
Conclusion
As Donald Trump enters his second term, Indian businesses and IT firms are gearing up for potential shifts in US trade policies. Whether through stricter visa rules or higher tariffs, the impact of Trump’s “America First” agenda could reshape the dynamics of Indo-US trade relations. However, with the growing importance of India as a trading partner, both countries may seek ways to navigate these challenges and unlock new opportunities in key sectors.