Trump 2.0: India To Benefit From Shifting Global Trade? Survey Explains

As the United States gears up for another term under former President Donald Trump , India's economic future remains uncertain but full of potential, according to the latest Economic Outlook Survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI). With Trump’s tariff policies and economic strategies on the horizon, India faces a unique blend of challenges and opportunities in the coming years.

Short Term Disruptions

Economists participating in the survey highlighted potential short-term disruptions as the U.S. adjusts its trade policies, which could significantly impact global supply chains. These disruptions could come via several channels, such as exports, foreign capital flows, and input costs, particularly for trading partners like India. “The likelihood of tax cuts (both personal and business) could increase the U.S. fiscal deficit, while higher tariffs and stricter immigration norms could push up labor costs and inflation," said one of the economists who contributed to the survey.

The U.S. may also experience an economic shift under Trump 2.0, with a possible reduction in Federal Reserve policy rates. This could lead to less-than-expected capital inflows into emerging markets, including India, contributing to fluctuations in the value of the rupee. Moreover, the survey noted that trade tensions, particularly between the U.S. and China, could further disrupt global supply chains, raising input costs for India’s exports in the short term.

Despite these concerns, there is optimism surrounding India's ability to benefit from the shifting dynamics of global trade. With an expected U.S. approach that is calibrated towards India, India is seen as a key player in the diversification of global supply chains away from China. India’s strategic position as a manufacturing hub could attract significant foreign direct investment (FDI) in sectors such as semiconductors, electronics, and automotive components.

“Targeted industrial policies and sector-specific strategies will remain critical to seizing these opportunities,” said a leading economist from the FICCI report. The diversification of supply chains away from China could allow India to capture a larger share of global manufacturing, particularly in high-tech sectors.

The survey also identifies India’s energy sector as a promising area for collaboration with the U.S. under the revitalized U.S.-India Strategic Clean Energy Partnership (SCEP). Areas such as renewable energy, energy efficiency, and sustainable fuels could see increased cooperation. Furthermore, India stands to benefit from lower global oil prices due to rising U.S. oil production.

"The strengthening of collaborations in sectors like civil nuclear energy and clean energy will further deepen India-U.S. ties,” said another participant in the FICCI survey. This growing energy partnership is expected to drive both countries toward a more sustainable and energy-secure future.

To address risks while capitalizing on these opportunities, economists have recommended a strategic approach for India. One suggestion is the evaluation of reducing tariffs on select U.S. imports to maintain revenue stability without causing major domestic disruption. Additionally, diversifying India’s export markets and leveraging ongoing trade negotiations will be critical to enhancing trade resilience in the face of new U.S. policies.

Furthermore, India’s economic growth will be bolstered by the development of high-quality industrial clusters with strong backward and forward linkages, allowing the country to integrate seamlessly into the diversifying global supply chains. In addition, infrastructure upgrades and sector-specific policies will play a vital role in attracting increased FDI and improving India’s competitiveness on the global stage.