Within hours of being sworn in as the 47th President of the United States of America, Donald Trump issued a series of executive orders that sent shock waves across the globe. From aggressive trade tariffs to changes in immigration, energy, and climate policies, Trump’s ‘America First’ agenda is unapologetically focused on boosting the US economy-often at the expense of its global partners.
Trump’s message was unambiguous at the World Economic Forum in Davos, where he promised businesses operating within the US some of the lowest tax rates globally. But his warning was just as sharp. “If you don’t make your product in America-which is your prerogative-then, very simply, you will have to pay a tariff. Differing amounts, but a tariff that will direct hundreds of billions, even trillions, into our Treasury to strengthen our economy and pay down debt,” Trump said.
CHANGING LANDSCAPE
Following up on his promise on the first day in office, Trump has announced that Canada and Mexico will face tariffs of 25% on their exports to the US while China will have an additional 10% tariff.
Prime Minister Narendra Modi is set to visit the US on February 12-13 for his first meeting with Trump in his second term and it remains to be seen if this will lead to better bilateral relations.
Markets have been volatile since Trump’s election, reflecting uncertainty about how his aggressive trade stance will reshape global supply chains. India is strategising to offset the impact of high taxes on imports while pushing domestic manufacturing and positioning itself as an alternative manufacturing hub to China.
“India may need to reassess its trade dependencies and realign supply chains,” says Rumki Majumdar, Economist at Deloitte India. “The good news is that India and the US have been strong trading partners for years, so adjustments might not require major shifts.”
While the US trade deficit with China has fallen by 15% since Trump’s first term, its deficit with India has surged by about 80%, indicating the US is now importing more from India.
Higher import costs could fuel inflation-a challenge India is already grappling with. High Inflation will also leave limited room for the Reserve Bank of India to ease monetary policy rates, Majumdar adds.
All these moves, along with energy price volatility, could force central banks worldwide to tighten monetary policy, potentially slowing economic growth.
THE H-1B CLOUD
Trump’s executive order to end automatic citizenship for children born in the US to non-citizen parents directly affects thousands of Indian families. A US District Judge has temporarily blocked the order, calling it unconstitutional, but the legal battle continues.
Meanwhile, uncertainty looms over the H-1B visa regime-a key concern for Indian IT professionals and students aspiring to work or study in the US. Trump’s immigration policies could significantly alter the landscape for skilled workers global pacts in limbo
In another bold move, Trump withdrew the US from two major international agreements: the OECD’s global tax deal and the Paris Climate Agreement.
The OECD deal, backed by 140 countries, aims to curb tax avoidance by multinational corporations through a global minimum corporate tax of 15%. It would change the tax landscape but the impact on India would be minimal for now.
However, Trump’s withdrawal from the Paris Agreement may have more profound implications. Declaring an “Energy Emergency,” his administration has rolled back incentives for electric vehicles and scrapped the Green New Deal. This has sparked fears that the US, as one of the world’s largest polluters, will slow the global transition to a low-carbon economy.
Experts say it remains to be seen how the Trump administration will handle the Nationally Determined Contributions to the UN Framework Convention on Climate Change that the Biden administration approved last month.
Climate finance is another area that may see the impact of US actions, as multilateral development banks (MDBs) are a major source of public climate finance to developing countries.
“MDBs are unlikely to continue focusing on climate finance. Given the US veto at the World Bank, they may force it to move away from climate financing,” says Labanya Prakash Jena, an expert on sustainable finance.
THE RIPPLE EFFECT
India’s growing green sector isn’t immune to these changes. Tariff hikes on green imports will raise costs for renewable energy projects. “The US sources a lot of raw material for solar manufacturing from South and Southeast Asia. Countries like India, which are stepping up supplies of green goods to the US, would see the impact,” says Trishant Dev, Programme Officer at the Centre for Science and Environment. India’s share of solar PV modules exported to the US rose from 2.5% in 2022 to 10.7% in 2024. “This will also solidify the role of China in the supply of green technology. With the receding role of the US, China will further strengthen its position in green trade,” he explains.
@richajourno, @surabhi_prasad