The Looming Shadow: How a Trump Return Could Jolts India-US Trade, Threatening its Services Lifeline

Even as India and the United States navigate the complex waters of global trade, a palpable sense of cautious optimism has begun to emerge from ongoing bilateral discussions. India's Commerce Secretary Sunil Barthwal recently confirmed significant "traction" in trade talks with the Biden administration, hinting at progress on crucial fronts such as enhanced market access, streamlining visa processes for Indian professionals, and robust intellectual property rights protection.

This positive momentum, however, is now overshadowed by a formidable question mark: the potential return of Donald Trump to the White House.

The specter of his "America First" policy, characterized by aggressive protectionist measures and unpredictable trade rhetoric, has cast a long shadow over the future trajectory of India-US economic relations.

For India, the stakes could not be higher, particularly concerning its burgeoning services sector.

While merchandise exports have seen a leveling off, services exports — encompassing everything from IT outsourcing and business process management to professional and financial services — have become a vital engine of growth for the Indian economy. The US, being the largest market for these services, represents an indispensable lifeline.

During his previous term, Trump's administration initiated a series of actions that directly impacted India, including the imposition of tariffs on steel and aluminum and the withdrawal of India's Generalized System of Preferences (GSP) status.

These moves, while significant, pale in comparison to the potential disruption a renewed Trump presidency could inflict on services trade.

Experts and policymakers are now bracing for the possibility of heightened scrutiny on H-1B visas, more stringent "buy local" mandates, and other non-tariff barriers that could severely restrict the movement of Indian professionals and the flow of services.

Such measures would not only disrupt established business models but also jeopardize the livelihoods of millions of Indians and the profitability of countless enterprises.

The current talks with the Biden administration aimed to address these historical grievances and build a more stable, predictable trade framework.

The agenda includes complex issues like market access for agricultural products, the regulatory landscape for medical devices, and even specific tariffs on items like pecans and almonds. A shift in US leadership could derail these delicate negotiations, forcing India back to the drawing board to confront a potentially more hostile trade environment.

India’s economic resilience will undoubtedly be tested.

With its substantial dependence on the US market for services exports, New Delhi finds itself in a precarious position, needing to strategize for various outcomes of the upcoming US elections. While the fundamental strategic alignment between India and the US remains strong, the immediate future of their trade relationship hangs in a delicate balance, swayed by the unpredictable winds of American politics.