Indian industries, particularly in textiles, are bracing for potential disruptions as Donald Trump re-emerges in the political landscape with his “America First” agenda. This initiative could lead to immediate challenges for sectors like textiles, steel, and information technology that have significant exposure to the US market. However, analysts suggest that any short-term setbacks might be outweighed by longer-term advantages stemming from a strategic shift in global supply chains, particularly as companies seek to reduce their reliance on China.
Tariff Battles Loom
The trade relationship between India and the US has historically been fraught with tension, particularly regarding tariffs and market access. Trump has previously labelled India as a “tariff king,” criticising its high import duties. During his first term, India faced national security tariffs on steel and aluminium exports, which significantly impacted its trade dynamics. In 2018, these tariffs resulted in a considerable decline in Indian steel exports to the US, highlighting the vulnerabilities of Indian industries under stringent tariff regimes.
Despite these challenges, India is reportedly better prepared now than during Trump’s previous administration. The Indian government has implemented several export-friendly initiatives over the past few years, including the Production-Linked Incentive (PLI) scheme and the “Make in India” initiative. These measures aim to bolster domestic manufacturing and enhance competitiveness in international markets. Analysts from Nomura emphasise that India is well-positioned within global value chains as businesses pivot away from China due to geopolitical tensions.
Opportunities Amidst Challenges
Sabyasachi Ray, Executive Director of the Gem and Jewellery Export Promotion Council (GJEPC), views Trump’s return as an opportunity to strengthen Indo-US trade ties. He believes that Trump’s commitment to stabilising geopolitical relations could alleviate some supply chain disruptions currently faced by exporters. Similarly, Siddhartha Rajagopal, Executive Director of the Cotton Textiles Export Promotion Council, reassures that India’s textile exports are likely to remain stable, with the US continuing to be a major market for Indian textiles and clothing.
Rajagopal notes that while other sectors may encounter market access challenges under potential new tariffs, textiles are expected to maintain their growth trajectory. This sentiment reflects a broader consensus among industry leaders that textiles will be less affected by the political shifts compared to other sectors.
Visa Policy Concerns
One area of concern is immigration policy, particularly regarding H-1B visas. Indian nationals constituted over 72% of H-1B visa recipients in FY23. Experts warn that tighter immigration policies could adversely affect Indian professionals seeking opportunities in the US. However, many Indian IT firms have adapted by enhancing local hiring practices and reducing reliance on H-1B visas, which may mitigate some negative impacts.
Agricultural Trade Prospects
Trump’s re-election could also positively influence India’s agricultural exports. With increasing demand for imported food products in the US, Indian agricultural commodities like shrimp may find new opportunities in American markets. Nevertheless, experts caution that reciprocal tariffs against Indian goods remain a significant risk under Trump’s proposed trade policies.
Strategic Relations
Despite potential tariff skirmishes, there is a bipartisan consensus in the US regarding the importance of strengthening relations with India. Anil Trigunayat, a former diplomat, highlights India’s economic and demographic significance as crucial to US strategic interests. He suggests that while occasional disputes may arise, the overall trajectory of US-India relations is likely to progress steadily due to shared geopolitical objectives.
In summary, while Trump’s return could herald short-term disruptions for Indian textiles and related industries due to heightened protectionism and tariff battles, there are also promising avenues for growth through supply chain realignments and sustained demand in key markets like textiles and agriculture.
