Trump's Return and India's Strategic Balancing Act

Donald Trump's return to the White House in January 2025 creates uncertainty for India—a relationship that had deepened under Biden but rests on complex interests that may shift under Trump's transactional approach to foreign policy.

The Tariff Wild Card

Trump campaigned on raising tariffs on all imports, with particular focus on China. For India, this creates mixed effects. Higher Chinese tariffs might make Indian exports—pharmaceuticals, textiles, IT services—more competitive in the US market. Yet broad tariff increases might slow US growth, reducing demand for imports.

The IT services sector, which depends on US clients, faces particular vulnerability. If tariffs slow US growth or if Trump pursues policies favorable to visa restrictions on foreign workers, Indian IT companies could see margin compression and recruitment challenges. Companies like TCS, Infosys, and HCL Technologies already navigate visa restrictions; additional restrictions could force acceleration of local hiring and onshore operations.

Textiles and apparel exports could benefit if Chinese alternatives become uncompetitive due to tariffs. Indian textile manufacturers have capacity to substitute Chinese suppliers. Yet India's garment industry faces its own challenges—automation and labor cost advantages in Vietnam and Bangladesh compete fiercely.

Strategic Alignment and Hedging

India views the US as a critical strategic partner in managing China's rise. The Quad framework (US, Japan, India, Australia) represents this strategic alignment. Yet India also maintains economic and diplomatic ties with China—border tensions notwithstanding—and refuses to choose sides in geopolitical competition.

Trump's transactional approach may test this balance. Will he pressure India for explicit anti-China positioning? Will he view India's strategic autonomy—including engagement with Russia and Iran—as insufficiently aligned with US interests? These questions create uncertainty.

India's approach will likely emphasize economic benefits and strategic cooperation on terrorism and maritime security while avoiding explicit anti-China rhetoric or formal military alliances.

Technology and Talent

The semiconductor sector offers potential cooperation. Both US and India share interest in alternatives to Taiwan for chip manufacturing. US companies could establish fabrication facilities in India with government support. This would strengthen bilateral ties while reducing US technological dependence on Taiwan.

Yet visa policy remains contentious. Trump has criticized H1-B visa programs as displacing American workers. For Indian IT companies and skilled workers, visa restrictions would increase costs and potentially reduce career opportunities in the US. Some emigration might shift to Canada or Australia, where immigration policies remain more liberal.

Economic Negotiation

Trade negotiations will intensify. Trump has indicated willingness to negotiate bilateral trade agreements rather than engage in multilateral frameworks. India may face pressure to reduce tariffs on agricultural products and industrial goods. Indian agriculture, particularly dairy, faces effective US competition and lobbies against market opening.

India will seek market access for textiles, IT services, and pharmaceuticals while protecting sensitive sectors. Given Trump's transactional approach, these negotiations could become contentious.

The Broader Picture

India's strategic calculus assumes US-China competition remains primary. Yet Trump's unpredictability creates risk. His transactional approach could lead to unexpected accommodation with China if Trump views such cooperation as beneficial for US interests.

For India, the strategy remains hedging—deepening US partnership while maintaining other options, avoiding explicit anti-China positioning, and securing economic benefits through negotiation.