A Trump Presidency Could Challenge the Indian Economy
Summary
A Donald Trump presidency could create economic challenges for India, particularly through potential trade wars and higher tariffs. While Indian Americans largely favor Kamala Harris, some Indians admire Trump’s hardline policies. Trump’s stance could impact India’s currency stability, growth, and inflation, especially given India’s growing trade surplus with the US. Under Modi, India has increased its own tariffs, aiming to protect local industries, though this approach has primarily benefited large corporations. To sustain growth, experts suggest India should prioritize trade liberalization rather than protectionism.
While most Indian Americans reportedly favor Kamala Harris over Donald Trump, some Indians admire Trump’s hardline stances. However, Trump’s policies could bring significant economic risks for India, especially if he pursues a trade war. Trump has criticized India as a “big abuser” of trade, suggesting potential tariffs of 10-20% on global imports, which could impact the rupee, tighten monetary policy, and slow economic growth in India. Harris, in contrast, has focused on trade with Russia in light of the Ukraine conflict.
Although a US-China trade war could, in theory, push companies to invest in India, high tariffs complicate supply chain investments. India’s own economic policies have turned increasingly protectionist under Prime Minister Narendra Modi, with numerous tariffs introduced since 2015, yet Chinese imports into India continue to rise.
India-US Relations: Key Points and Challenges
The United States and India enjoy bipartisan support for strong relations, bolstered by strategic competition with China and cultural and economic ties. However, the relationship has its challenges. The US is wary of India’s relationship with Russia, including oil imports, and Trump’s history of tariffs on Indian goods has strained trade ties.
During Trump’s previous term, he imposed tariffs on Indian steel, aluminum, and removed trade benefits under the Generalized System of Preferences (GSP). Under Biden, relations improved with trade agreements and renewed visa options for Indians, but India’s trade surplus with the US and rising reliance on US markets make it vulnerable to potential conflicts.
India’s Economic Landscape and Protectionism
Trump’s aggressive trade stance could intensify India’s inflation if tariffs return, particularly if India retaliates. India, under Modi, has become more protectionist, with thousands of tariffs introduced to support local industries, yet these policies often benefit large corporations at the expense of consumers. Modi’s approach diverges from the liberalization policies championed by former Prime Minister Manmohan Singh, which fostered growth and jobs through open trade.
Ultimately, to sustain economic growth, India might benefit more from liberalizing trade rather than erecting higher tariff barriers, thus boosting exports, creating jobs, and tapping into new markets for Indian businesses.
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