US Presidential hopeful Donald Trump delivered a significant economic policy speech in Detroit this month where he singled out India as the “biggest charger of all.”
He was referring to India's tariffs on foreign products.
Trump promised to impose a reciprocal tax if elected.
His rival, vice-president Kamala Harris, has stated that she is not a “protectionist Democrat” but tellingly, the Biden administration has not reversed Trump’s decision to revoke India’s Generalized System of Preferences (GSP) status, which had previously exempted many Indian products from import duties.
This unusual convergence of sorts between Democrats and Republicans has been described as the “Trumpification of American policy.”
Regardless of who wins the election, India is likely to feel the “Trumpification”.
However, India and the US have much to gain from their strengthening defence and strategic technology ties, which may help ease tensions in trade and immigration, even if India’s expectations are not fully met.
Economic challenges
India’s biggest vulnerability lies in Trumpian economics. Of its top ten trading partners, the US is the only one with which India has a trade surplus.
This year, the US became India’s top trading partner. At the same time, India registered its largest trade deficit with China, its second-biggest trading partner. India’s deficit with China reached $US41.6 billion in January-June 2024.
In an interesting mirroring, India’s exports to the US during the same period stood at $US41.6 billion.
Indian exports to the US are diversified and benefit several sectors of the economy, from labour-intensive textiles to capital-intensive electronics and engineering.
Trade with the US is a big source of India’s foreign exchange which India can’t afford to lose. India’s dependence has only increased over the last decade as the US trade share rose from 10 percent to 18 percent of its total exports.
Although India’s trade surplus with the US is well below ten others, it can certainly expect to be a target under Trump.
The Joe Biden and Harris administration has also been shifting toward a new protectionism which has gained momentum during this election season. Harris’s platform keeps most of Trump’s tariffs in place.
The recent call by Harris to block a Japanese company from buying US Steel on national security grounds shows that the Democrats won’t give even their closest ally a pass, and is not above playing politics with economics.
Talks on a general Free Trade Agreement with India have not made much progress over the last four years, unlike India’s negotiations with the EU for a pact.
Technological gains
Under Harris, India can expect to reap substantial benefits from the Biden administration’s steps to ensure the global technological balance of power shifts away from China.
In a long-term competitive gamble that converges with New Delhi’s concerns over China’s rise in Asia and hostilities on their border, America seems wedded to building up India’s capacity in strategic sectors.
The bilateral Initiative for Critical and Emerging Technology (iCET) opened a broad spectrum in areas including artificial intelligence, quantum technology, space, 6G mobile tech and semiconductor supply chain.
During Indian Prime Minister Narendra Modi’s visit last month for the Quad Summit hosted by Biden, the two countries announced a pathbreaking deal to set up a semiconductor fabrication plant in India.
This agreement has the potential to finally launch India onto the global semiconductor stage, something it had set its eyes on since making its chip ambitions known in 2021.
Designed to produce chips for military applications, critical telecommunications, and clean energy, the venture will be supported by the Indian Semiconductor Mission and involves Bharat Semi, 3rdiTech, and the US Space Force.
Harris is known to be deeply entrenched in the Silicon Valley world and tech cooperation is something that she will probably want to fast-track.
Trump’s confrontational approach to China will only lead to fine-tuning or even stepping up such competitive initiatives with partners such as India in the Indo-Pacific.
On the critical clean energy front, both countries are in principle aligned, but the candidates are not.
In the Biden-Modi meeting last month, innovative clean energy technology was another key area where bilateral cooperation was elevated.
They announced a new effort to “expand bilateral technical, financial, and policy support” in manufacturing and to promote greater partnerships in third countries, especially in Africa.
Funding is to be secured multilaterally through the World Bank, apparently to the tune of $US1 billion. Cleantech financing has previously come up against funding hurdles time and time again.
Rhetoric aside, it remains to be seen if the money materialises.
If Trump comes to power, this type of policy promise will no doubt be swept aside. Harris is now a convert to fracking which raises some questions about her commitment to climate change and clean energy options once in office.
Young India
India has the largest population of people under 24 – more than 600 million. By 2030, one out of every five working-age people will be Indian.
To meet employment demand created by the demographic dividend, it is estimated that India will have to create at least 115 million jobs over the next five years, a task experts describe as “Herculean” and something the Modi government has not been delivering on.
To young Indians eager to come to the West to study or work, the next US president’s immigration policies will matter.
Neither Harris nor Trump have clear and consistent stands. Trump may revive his hardline on immigration and restrict H1B visas by requiring additional biometrics, delayed processing times, and wage mandates making it financially less viable for companies to hire H1B workers.
Harris has projected herself as a supporter of more open immigration policies, including greater protection for undocumented immigrants and a better system for recruiting and retaining global talent.
However, she has remained silent on a country-wide green card cap, which poses a challenge for would-be immigrants.
Meanwhile, Trump promised, then his campaign retracted, his offer to provide automatic green cards to foreign students graduating from colleges in the US.
In 2024, the largest number of foreign students in the US are estimated to be from India. For the first time since 2010, India passed China last year as the source country for international graduate students in the US. The US is still the top choice for Indian students pursuing higher studies abroad.
How do the future “influencers” from India’s Gen Z view the US-India partnership?
Informal surveys from a sampling of Indian students in South India asked what they see as the top three convergences and divergences in the relationship.
It turns out that the convergences were strong and clear: the challenge of a rising China; climate change; defence tech cooperation.
Divergences were weaker and more diffuse, but wide-ranging and more direct: trade sanctions; intellectual property protocols; restrictive immigration; regional political instability; and concerns about data sharing.
Whether Harris or Trump wins in November, the rapid rise of bilateral relations in the strategic and defence sectors is expected to continue with little interruption.
What the next American president may need to be more alert to is the rising expectations of a jumbo generation of Indian Gen Z-ers who have grown up knowing only close US-India ties, and who expect more than just a transactional partnership between the two countries in the economic realm that can produce tangible and immediate benefits for them.
Deepa M. Ollapally is a Research Professor of International Relations and Director, Rising Powers Initiative, Elliott School of International Relations, George Washington University.
Originally published under Creative Commons by 360info™.
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