Trump's America First Agenda: Impacts on H-1B Visa Rules and Trade with India

New Delhi: As Donald Trump prepares to take office again, his "America First" agenda may lead to significant changes in trade policies that could affect Indian exporters. According to trade experts, high customs duties on goods such as automobiles, textiles, and pharmaceuticals may be implemented, making it harder for Indian products to compete in the U.S. market.

Experts are particularly concerned about potential tightening of H-1B visa rules, which could significantly impact Indian IT companies, as over 80 percent of India's IT export earnings come from the United States. Any changes in visa policies could increase costs and stifle growth for Indian firms.

The U.S. is India's largest trading partner, accounting for over USD 190 billion in annual trade. Ajay Srivastava, the founder of the Global Trade Research Initiative (GTRI), mentioned that tariffs, which had mainly been directed at China, could extend to India and other nations under Trump's administration. Trump has previously labeled India a "large tariff abuser" and called it the 'tariff king' in October 2020, indicating a likelihood of stricter trade negotiations in his second term.

"His America First agenda would likely push for protective measures, such as reciprocal tariffs on Indian goods. This could create challenges for crucial Indian exports like automobiles, textiles, and pharmaceuticals," Srivastava stated. He noted that while a tough stance against China could close certain doors for India, it might also open new opportunities for exporters willing to adapt.

The bilateral trade in goods between India and the U.S. was USD 120 billion in 2023-24 compared to USD 129.4 billion in the previous year. A GTRI report highlighted that the U.S. imposes significantly high tariffs on various items, including dairy products (188 percent), fruits and vegetables (132 percent), and cereals (193 percent).

International trade expert Biswajit Dhar predicts that Trump will raise tariffs across multiple sectors to align with his "Make America Great Again" message. With Trump’s return to power, we could expect a shift toward increased protectionism affecting sectors like electronics. Furthermore, his previous withdrawal from the Trans-Pacific Partnership (TPP) raises doubts about the future of the Indo-Pacific Economic Framework for Prosperity (IPEF), which was launched in 2022.

Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO), believes that while Trump might advocate for more balanced trade, it could spark trade disputes centered around tariffs. He anticipates continued protectionism, which would extend to stricter immigration rules.

Agneshwar Sen, Partner at EY India, noted that high tariffs may be employed strategically to encourage onshoring of manufacturing and alter existing supply chains. Indian exports of textiles, chemicals, pharmaceuticals, and automotive products could face higher tariffs, prompting a need for India to explore alternative markets or consider retaliatory tariffs on U.S. goods.

In addition to the trade challenges, stricter H-1B visa policies could heavily restrict the movement of skilled workforce from India, particularly impacting the IT sector. Srivastava cautioned that Trump’s stringent immigration policies might lead to significant changes that could elevate costs for Indian IT firms. Nevertheless, the possibility of relaxed labor and environmental standards might ease entry for Indian exports into the U.S. market.

Trump may also expect India to align more closely with U.S. geopolitical strategies. This realignment could enhance India's role as an alternative supplier in sectors like electronics and pharmaceuticals, though it may compromise some of its foreign policy independence. Concurrently, India’s demand for advanced technology and capital goods from the U.S. suggests that there are opportunities to expand bilateral trade.

From fiscal years 2020 to 2024, India's merchandise exports to the U.S. grew by 46 percent, reaching USD 77.5 billion. Imports from the U.S. also increased, totaling USD 42.2 billion last fiscal year. Furthermore, trade in services has expanded, with an increase from USD 54.1 billion in 2018 to an estimated USD 70.5 billion in 2024.

India is an important market for American companies, especially in sectors like IT and professional services. The U.S. remains a significant investor in India, having injected USD 66.7 billion from April 2000 to June 2024. Additionally, India purchases substantial amounts of military equipment from the U.S. and conducts over 90 percent of its global trade in U.S. Dollars.

According to Srivastava, U.S. companies like Google and Amazon generate significant revenue from their engagements in the Indian market, illustrating the economic interdependence of the two nations. The landscape of U.S.-India trade may be on the verge of change, emphasizing the need for preparedness from both sides as the new administration takes form.

Trump, Trade, Visa