India prepares for a new chapter in US relations as Trump reclaims the White House

In the wake of Donald Trump’s historic return to the White House, India’s diplomatic and business community is bracing for changes that may reshape bilateral relations. With Trump’s re-election ushering in a fresh wave of protectionist rhetoric and potential policy shifts, India’s External Affairs Minister, S. Jaishankar, highlighted the opportunities and challenges that lie ahead. Speaking to CEOs and business leaders in Sydney, Jaishankar underscored the likely consequences for India, from supply chain shifts to digital transformation and talent mobility.

Supply chain realignment: Opportunity amid disruption

Jaishankar emphasised that the ongoing restructuring of global supply chains, intensified by pandemic disruptions and geopolitical tensions, stands to accelerate under Trump’s presidency. The US-India relationship has already felt the effects of these shifts, as companies increasingly favour regional supply networks to mitigate risks. India, with its emerging manufacturing base, is poised to benefit from this transition. “We see these disruptions as opportunities,” Jaishankar stated, pointing to the potential for economic integration and growth as multinational corporations seek alternative production hubs.

However, Trump’s renewed focus on American manufacturing may also challenge India’s export dynamics. Trump has long campaigned on a pledge to reindustrialise the US, and his second term could see heightened tariffs on foreign goods. Trade experts warn that a “Trump 2.0” administration could target key Indian exports, from pharmaceuticals to textiles, which could disrupt India’s revenue streams and impact employment within these sectors.

Geopolitical hedging and digital synergies

Jaishankar also addressed the role of geopolitical hedging in US-India relations, noting that India’s strategic importance will grow as nations navigate a more polarised global landscape. The US’s complex stance on China, marked by both rivalry and economic interdependence, opens new avenues for India to step in as a reliable partner. As Trump seeks to tighten restrictions on Chinese imports, Indian exporters may find new market opportunities, filling the gaps left by a shrinking Chinese presence in the American market.

On the digital front, Jaishankar predicted an increased focus on technology cooperation, noting the heightened emphasis on digitisation in the bilateral relationship. India has made remarkable strides in digital transactions and digital infrastructure, and the US could view India as a partner in building resilient digital ecosystems. With over 11 billion monthly transactions, India’s prowess in digital finance could foster a robust partnership in tech innovation, including cybersecurity, fintech, and data security.

Talent mobility and immigration concerns

Talent mobility, a linchpin of the US-India economic relationship, remains a contentious issue, especially with Trump’s anti-immigration stance. Jaishankar acknowledged that while global demand for skilled workers continues, India’s technology sector could face obstacles under Trump’s stricter visa policies, notably for H-1B and L-1 visa holders. Indian IT firms heavily rely on these visas to operate in the US market, and a potential clampdown could stymie access to skilled Indian professionals, impacting not only individuals but also companies invested in cross-border projects.

Trump’s anti-immigrant rhetoric has cast uncertainty over the future of skilled Indian workers in the US, creating an urgent need for India to strike a careful balance in navigating these restrictions while retaining access to the US market. Experts believe a hardening stance on work visas could prompt Indian firms to bolster their domestic operations or explore alternative markets.

Trade relations on a precarious edge

India’s trade with the US, valued at nearly $120 billion in 2023-24, faces a possible recalibration under Trump’s trade agenda. His campaign statements hint at a 10% tariff on imports and potential tariffs as high as 60% on Chinese goods, measures that may ripple through India’s export channels. Ajay Srivastava of the Global Trade and Research Initiative suggests that India may need to brace for new tariffs on automobiles, wines, and consumer goods, areas vulnerable to US protectionism.

In sum, India finds itself at a pivotal moment as Trump re-enters the global stage. While the US-India partnership could deepen through new digital and geopolitical strategies, protectionist tendencies pose significant challenges. As Jaishankar’s speech underscored, India must leverage both diplomacy and adaptability to protect its interests and seize the openings in an evolving US-India relationship.