Trump 2.0 and Its Effect on Indian Market

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Indian stock market reacting to Trump's win

The phrase, “When the U.S. sneezes, the world catches a cold”, comes to mind with the terrific pull the United States exerts on the rest of the world through its economy. With being the home for as good as 26% of the world’s GDP and with defense spending being unmatched ($916 billion, which is 37% of Global Military Expenditure), the country’s domestic decisions are really taken worldwide. Hence election though being a domestic affair, but given the size of economy of U.S. and its domino effect on global economy, whole world was eager to know who’s going to win between Donald Trump and Kamala Harris. But eventually, Trump became victorious based on his isolationist stance (detaching from other nations and focusing more on domestic affairs) and belief in using trade as a weapon and being sceptical of alliances like NATO.

 

Impact on Indian Market:

 

  1. Tax Cuts: Cutting corporate tax to 15% will attract even more production to America and reduce opportunities for Indian IT firms, including TCS and Infosys, to outsource to India, though it will increase more investments by U.S in India’s technology sector-a trend that had continued in his first term.
  2.  Immigration & H-1B Visas: Continuing to constrict policy around immigration, especially the H-1B visas, which accounted for 70 per cent of Indians’ total visas, will obviously contract the potential Indian talent in the US as several dependent firms rely on these visas.
  3. Higher Tariffs on Chinese Imports: Trump’s plan to impose 60% tariffs on Chinese imports will push global companies to find alternative production hubs. This could position India as a preferred manufacturing destination for sectors like auto parts, textiles, and electronics, potentially boosting India’s export volumes.
  4. China Plus One” Strategy: It is a step to reduce U.S. dependence on Chinese supply chains, which best suits the interests of India. Corporates like Apple already are upscaling manufacturing in India, which may attract more foreign investment to boost the “Make in India” initiative and “Production Linked initiative (PLI)” schemes.
  5. Pharma Sector: From an Indian perspective, moving to curb Chinese Import shipments, the biosecurity act of Trump is going to further more export opportunities for Indian pharma companies particularly in the generic as well as Active Pharmaceutical Ingredients (APIs) markets.
  6. Metals & Strategic Minerals: India depends less on metal sourcing from China and there is a positive push in the mining sector within India to supply rare earths and other strategic minerals for this purpose.
  7. The Energy Sector: As he loves fossil fuels, crude oil prices all over the world would stabilize. India will save, in the long run, on its energy import bills. But it will also slow down India’s quest for renewable sources. 
  8. Defence & Security (QUAD): Better relations through the Quadrilateral Security Dialogue (QUAD) would only further strengthen the robustness of India’s security posture with the US, Japan, and Australia. Much military cooperation and technology sharing would form part of India’s relationship with these countries.

 

In a nutshell, another four years of Trump would mean a cocktail of new challenges and opportunities in all these areas for India. To what extent this is the case depends on how these policies are actually implemented and the strategic response of India in terms of managing to capitalize on new opportunities.

 

Abhilash Kumar Parhi

Balasore, Odisha

MBA 1st Year (G-11)

Universal Ai University