A second Trump term is not good news—either for the US or the world

Trump has promised, besides cracking down on illegal immigrants, to cut taxes, impose steep tariffs on imports, stop the war in Ukraine in one day, allow Israel to complete its job in the Middle East, backtrack on American commitments on climate change, and force American allies in Europe and Asia to take greater responsibility for their own defence and security, so as to reduce the US fiscal burden for 'defending the free world’.

Stock market investors are cheered by the prospect of lower corporate and income taxes. Expect American stock prices to go up in the short term. The short-term prospects for US growth are positive, and those for inflation are muted. The Federal Reserve should be expected to go ahead with its interest rate cuts, boosting stock prices and encouraging more funds to flow to markets abroad, including India.

Also Read: Trump’s second term: Let’s hope his campaign was mostly rhetoric

However, medium-term prospects are less bright. Trump’s tax cuts and giveaways will widen the fiscal deficit and create excess demand that pushes up inflation. Across-the-board tariffs on imports will further boost prices and reduce the availability of cheap goods, especially if Trump goes ahead with his threat of levying a 60% import duty on imports from China. 

A curtailed supply of legal or illegal immigrants into the US would put pressure on the labour market and raise wages, adding another layer of inflation pressure. Trumpian tariffs would invite retaliatory measures by trade partners. A trade war would depress global growth and the export demand for every country. By the time these impulses work through the economy, Trump’s presidential term would be over, and it would be up to the next administration to clean up the mess.

India-US relations

India’s relations with the US are built not on personal whims and fancies of any leader but on a fair amount of strategic convergence between the two nations, thanks to the US identification of China as its global strategic rival and India’s potential to countervail China in the Indo-Pacific. That relationship has been growing ever since former US president George W. Bush and former Indian prime minister Manmohan Singh inked the Indo-US nuclear treaty in 2008.

Also Read: Brace for impact: How Trump's tariff plans could affect Indian businesses

India’s enhanced procurement of US weapons and efforts to jointly produce cutting-edge armament in India can be expected to continue. Trump’s new ally, ace entrepreneur Elon Musk, can be counted on to recognize the importance of Indian talent to the continued vibrancy of America’s Big Tech. That means H-1B visas for Indian professionals would not only not be at risk but might even be available on easier terms than they are at present.

Trump is getting support presumably because he articulates the view of a vast number of Americans, even if not the majority, that the US should disengage somewhat from the wider world so as to focus on the tasks at home that would ‘Make America Great Again’. That process gives added legitimacy to seeing ‘outsiders’ as threats and lesser beings. White supremacists who have been solidly behind Trump can be expected to feel free to exercise their superiority over people of colour with enhanced impunity. Expect the random attacks that people of Indian origin experience in the US to go up in frequency. But these would, of course, pale in comparison with the conflict among racial groups that can be expected to flow from the mass deportations of migrants that Trump has promised.

Dubbing immigrants as rapists, criminals and drug peddlers and describing African nations as shitty countries will not promote tolerance of racial minorities. Trump’s promise to pardon his own past crimes and those of his followers, who had attacked the Capitol on 6 January 2021, will embolden vigilantism. The potential for urban crime and violence goes up in the US.

Also Read: US elections 2024 outcome is set to reshape India trade ties

Women’s right to determine what happens to their own bodies is threatened by the return of Trump to the White House. It is normatively a setback for women and gender rights in general everywhere.

Trump’s isolationist streak in foreign policy would encourage countries like South Korea and Japan to develop the nuclear weapons they are technically capable of producing but had forsworn in return for the promise of America’s nuclear shield.

Expect more and more countries to spend more and more on arms. Arms manufacturers will turn market darlings, along with Tesla and other tech companies.