US Elections 2024: 5 key points from Donald Trump’s election manifesto that may impact India

Donald Trump has secured his return to the White House as the 47th President of the United States, following a highly-competitive election on November 5, 2024. Trump won against Kamala Harris, the Democratic contender, marking his comeback after a four-year hiatus. His re-election signifies a potentially transformative period for both the domestic and global economic landscape, underpinned by major policy proposals that could influence international trade, fiscal stability, and geopolitical relations, said CareEdge Ratings in a recent note.

Trump’s Policy Agenda

5 key points from Donald Trump’s election manifesto that may impact India:

Tax Reforms: As per the report, Trump’s policy platform emphasises extending the 2017 Tax Cuts and Jobs Act (TCJA), which includes cuts to individual and estate taxes due to expire in 2025. He proposed lowering the corporate tax rate from 21 per cent to 15 per cent for domestic manufacturers and eliminating the cap on state and local tax deductions. Additional plans include capping credit card interest rates at 10 per cent, making car loan interest payments tax-deductible, and abolishing taxes on Social Security benefits. CareEdge highlighted that while these measures may stimulate consumer spending, they carry inflationary risks and could exacerbate the existing fiscal deficit, already at 6.3 per cent of GDP, with government debt at 123 per cent of GDP.

Trade Tariffs: Trump has outlined an aggressive stance on trade, proposing 60 per cent tariffs on Chinese imports and 10-20 per cent tariffs on imports from other nations. He also suggested imposing 100-200 per cent tariffs on vehicles manufactured in Mexico to promote US job growth and discourage the circumvention of tariffs by Chinese manufacturers using Mexican plants. While these tariffs could disrupt global trade flows and raise domestic prices, they might provide India with an opportunity to benefit from a supply chain shift away from China. However, CareEdge cautioned that a broader trade slowdown could negatively impact India.

Foreign Policy and Defense: The report further informed that Trump pledged to end ongoing conflicts, such as the Russia-Ukraine war and Middle East tensions, although without detailed plans for achieving these goals. He reiterated support for Israel and called for NATO members to meet the defence spending target of 2 per cent of GDP, a metric many members currently fall short of.

Immigration and Outsourcing: Stringent immigration policies are part of Trump’s platform, with proposed penalties for visa overstays and unauthorised entries. CareEdge noted that this could affect India’s IT sector, which relies heavily on the US market and receives a significant portion of US work visas.

Energy Strategy: The new administration plans to ramp up domestic fossil fuel production, remove delays on drilling permits, and dismantle restrictions related to greenhouse gas emissions. By reducing subsidies for green technologies from the 2022 Inflation Reduction Act and facilitating natural gas exports, Trump aims to lower energy prices. This could positively impact India, a country that imports approximately 85 per cent of its oil needs, as increased US oil production could contribute to stable global oil prices, stated the report.

Market and Economic Implications

CareEdge underscored the potential inflationary impact of Trump’s proposed policies, which include tax cuts and significant tariffs on imports. While these measures could widen the US fiscal deficit, the full outcome depends on the extent of tariff enforcement and possible trade negotiations. A rise in prices for imported goods could follow, influenced by the scope of the tariff regime, it further pointed out.

US Dollar and Market Sentiment

Trump’s return to power and associated economic policies are expected to support the US dollar in the short term. However, CareEdge predicted that, over the long term, the dollar might face downward pressure due to a potential increase in fiscal deficits. This could, in turn, create volatility for the Indian rupee. Nonetheless, India's robust forex reserves are expected to help the Reserve Bank of India manage such fluctuations effectively. The rupee could face less depreciation compared to the Chinese yuan, which may suffer due to Trump’s proposed tariffs targeting China.

Outlook for Indian and Global Markets

As per the report, India could witness the return of Foreign Portfolio Investment (FPI) inflows as greater clarity on Trump’s policies emerges, potentially easing currency pressures. CareEdge noted that passive inflows related to India's inclusion in global bond indices could also support the rupee. The impact on other Asian currencies with significant exposure to China remains uncertain, particularly as Beijing’s response to the tariffs will play a crucial role. If China implements effective stimulus measures, it could mitigate negative effects on its economy and stabilise regional currencies.

Trump’s victory heralds significant shifts across various sectors, from trade and energy to fiscal policies and immigration. While CareEdge pointed out that these proposed changes could stimulate US economic growth in the short term, they come with inflationary and deficit-related challenges. For India, the evolving landscape presents both opportunities and risks, with potential benefits stemming from a re-oriented global supply chain and challenges linked to global trade disruptions. Monitoring the implementation of Trump's policies and international responses will be critical in shaping the economic and market trajectories in the coming years.

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