New Delhi: Donald Trump’s election to the post of US President for a second time is likely to be a mixed bag for the global economy, including India. To be sure, Indian indices rallied over 1 per cent on Wednesday. The surged 901.50 points or 1.13 per cent to 80,378.13, while the Nifty was up 270.75 points or 1.12 per cent to 24,484.05.
While IT stocks led the rally, banking and consumer stocks were in red. In the lead up to the US election results, Indian indices made stock investors richer by Rs 10.47 lakh crore. The IT rally was led by expectations of a potential favourable view of the new administration on H1B visas, said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.
Sectors likely to be affected by Trump’s win
Trump’s stated aggressive stance on trade tariffs is primarily directed at China. However, the tariff wars with the Asian giant are likely to have wider ramifications for other Asian manufacturing and trade-linked economies, including India. India’s key exports, namely, automobiles, textiles and pharma are likely to bear the brunt of a tariff hike by the incoming Trump administration, according to experts.
While IT firms’ stocks jumped on Wednesday, H1-B visa rules may be tightened under Trump, said the experts cited above. This is also likely to impact Indian IT sector earnings for whom US makes up the biggest market.
Protectionism and reciprocal tariffs
As stated above, trade tariffs may be widened beyond China to other Asian countries during Trump 2.0, according to Global Trade Research Initiative (GTRI) Founder Ajay Srivastava. On the campaign trail, Trump had called a “large tariff abuser”. He used the words ‘tariff king’ in 2020 to describe India in a derogatory manner.
As a result, Trump may push for reciprocal tariffs on auto, pharma and textile sectors. Wines may also invite a similar tax, according to Srivastava. A tariff hike will blunt the competitiveness of Indian exports, hurting company bottom lines, he added. Trump is also likely to lay emphasis on narrowing the trade deficit while increasing trade protectionism, which is again likely to impact Indian exports, said Ajay Sahai DG at the Federation of Indian Export Organisations (FIEO).
Geopolitical compulsions to soften blow?
To be sure, Trump may offer concessions to India in view of larger geopolitical plans, according to GTRI’s Srivastava. India is expected to order more from the US to meet its demand for advanced technology and energy apart from capital goods, he added. This is expected to bridge any gap in the trade deficit with the US, Idnia’s largest trade partner, he added.
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