India-US Economic Relations: A New Landscape
By Dr. Jayantilal Bhandari
January 31, 2025
On January 27, Indian Prime Minister Narendra Modi had a phone conversation with U.S. President Donald Trump, congratulating him on his historic second term. During this discussion, they explored avenues for advancing the broad bilateral partnership between India and the United States in trade, technology, investment, energy, and defense. The conversation marks the emergence of a new economic landscape between the two nations. Notably, Prime Minister Modi is expected to visit the United States in February 2025, and President Trump is expected to visit India later in the year for the QUAD summit, further strengthening the economic ties.
It is noteworthy that on January 20, following his inauguration as the 47th President of the United States, Donald Trump declared that America is entering a golden era, promising to make the country prosperous again. He emphasized that the U.S. would become the global manufacturing hub once more, and tariffs on foreign products would be increased to protect American interests. This signals the new economic strategy under his second term.
Post-inauguration, Trump announced new economic measures, including tariffs on goods from countries that reduce their use of the U.S. dollar in global trade, specifically targeting BRICS nations. However, there were no adverse impacts suggested for the Indian economy, and Trump's approach now seems even more economically assertive. The implications for trade are significant, as the U.S. seeks to control China's growing economic dominance, which has been challenging the global economic order.
Trump has already indicated higher tariffs on countries with which the U.S. has the largest trade deficit, including China, Canada, and Mexico. These measures could present opportunities for India, as there may be increased export opportunities due to the lowering of tariffs on certain Indian products. U.S. Ambassador Eric Garcetti stated that Trump's visit would strengthen the economic relationship between India and the U.S. Prime Minister Modi, in his message of congratulations, emphasized collaboration for mutual benefit, which could lead to new opportunities for India in the evolving global economy.
Trump’s new term prioritizes the concept of 'America First,' signaling a shift away from globalization towards self-reliance and economic resilience for the U.S. This strategy responds to the failures of global trade norms, particularly in the face of China’s disregard for established rules, including intellectual property theft and industrial dominance. As a result, by 2030, China’s manufacturing sector is expected to surpass that of the entire West.
In response, China is adopting aggressive monetary policies and economic strategies to counter Trump's challenges. However, global economic analysts predict that countries like India and ASEAN will benefit from Trump's economic policies, with India likely to see increased trade and investment opportunities as a result. In the fiscal year 2023-24, India’s trade with the U.S. reached approximately $120 billion, with a positive trade balance of $35.3 billion in favor of India.
Reports from institutions like RIS suggest that despite challenges, there are numerous opportunities for India to expand trade with the U.S. and other global markets. India must focus on a multifaceted strategy to boost exports, including to the U.S., while taking advantage of the changing dynamics of global trade.
India can benefit from Trump's higher tariffs on some of its products by negotiating reductions on selected goods to strengthen exports to the U.S. This aligns with the 'China Plus One' strategy, opening more opportunities for India in the global market. As the new economic strategies unfold, India-U.S. relations will likely enter a new phase, contributing to India’s goals of becoming a developed nation by 2047.
Author: Dr. Jayantilal Bhandari
Contact: 111, Gumastha Nagar, Indore-9, Mob: 9425478705, Phone: 0731 2482060, 2480090