As the 2024 US presidential election draws near, businesses in India, like Alpine Apparels, are on high alert. The leather manufacturer, once able to export products to the United States tariff-free under the Generalized System of Preferences (GSP), saw these privileges revoked in 2019 under former President Donald Trump’s administration. The decision has raised export costs for Indian businesses, adding to concerns over what another Trump presidency or a Kamala Harris administration might mean for US-India relations.
In a recent interview, Sanjay Leekha, founder and chairman of Alpine Group, expressed apprehension about the potential re-election of Trump. “When the GSP went away, it increased our landing cost into the US by about 4 to 6 percent, which is a substantial cost,” he noted. Leekha’s concerns are echoed across various sectors of India’s economy, which depend on stable trade policies and favorable diplomatic ties with the United States. As Indian observers and policymakers assess the potential impacts of the upcoming election, it’s clear that the US-India relationship, a cornerstone of regional geopolitics, may be reshaped in pivotal ways depending on who claims victory on November 5.
The Generalized System of Preferences, a longstanding trade program, allowed developing countries to export certain goods to the United States duty-free, making it a valuable asset for businesses like Alpine Apparels. However, the GSP was rescinded for India in 2019, a move that forced Indian exporters to shoulder additional costs that have since eroded their competitiveness in the US market.
Leekha highlighted the significance of this shift, noting that the additional landing costs make it difficult for Indian businesses to compete with counterparts in other countries that enjoy lower tariffs. These higher import costs have created a ripple effect in India’s export sector, reducing revenue margins and affecting production scales. Today, Indian exporters are left grappling with the possibility of further tariffs and trade barriers if Trump returns to power.
The approach toward trade with India could differ markedly depending on whether Trump or Vice President Kamala Harris emerges victorious. Trump, who has historically accused India of imposing steep tariffs on American products, has already signaled his intentions for reciprocal tariffs if re-elected. He has often cited the lack of market access for US firms in India, pointing to tariff and regulatory barriers that protect domestic industries but can stymie foreign competition. His stance echoes the protectionist “America First” doctrine that marked his first term, potentially foreshadowing a harder line on trade with India.
Meanwhile, Harris, who would be expected to maintain a continuity in Biden’s policy framework, represents a more stable approach to the US-India trade relationship. Under Biden, the United States and India made headway in settling long-standing trade disputes and collaborated to strengthen both economic and military ties. Biden’s administration viewed India as a strategic partner in countering China’s regional influence, leading to initiatives that eased trade restrictions and shared technology for defense production with India. However, some analysts warn that Harris’s outspoken stance on human rights could create friction, especially as New Delhi continues its close engagement with Russia and manages complex relationships with neighbors China and Pakistan.
For Biden, the emphasis has been on positioning India as a counterbalance to China. During his administration, Biden intensified efforts to fortify the Quad – a strategic alliance between the United States, India, Japan, and Australia – to ensure stability and security in the Indo-Pacific region. This has included joint military exercises, defense technology transfers, and diplomatic dialogue aimed at checking China’s influence in Asia.
Meera Shanker, India’s former ambassador to the US, praised Biden’s diplomatic groundwork, which involved creating “institutional groups” and partnerships that could endure over the long term. “Biden has worked pretty systematically to build institutional groups, to create a better balance [in the region],” Shanker said. However, Shanker cautioned that another Trump presidency could upend some of these structures, given Trump’s preference for direct and often unpredictable foreign policy actions.
Despite Trump’s hardline rhetoric on China, some experts believe his strategic goals might not align as closely with India’s interests, as his approach could be more transactional than alliance-based. Shanker suggested that a potential second Trump administration may prioritize short-term trade gains over the broader stability that Biden pursued in his alliances.
Vice President Harris has been vocal about human rights concerns, which could lead to increased scrutiny of India’s domestic policies if she assumes office. Harris, who raised the issue in her first meeting with Indian Prime Minister Narendra Modi in 2021, would likely continue Biden’s policy of addressing human rights openly, in contrast to Trump’s practice of downplaying such issues. Analysts predict that a Harris administration could potentially pressure India on freedom of speech, religious inclusivity, and other human rights matters.
India’s close relationship with Russia also remains a point of contention. As the war in Ukraine continues, the United States has urged its allies to distance themselves from Moscow, while India has maintained a more neutral stance, purchasing two-fifths of its oil from Russia. Washington’s pressure on India to curb ties with Russia could test the flexibility that New Delhi seeks in managing its relationships with global superpowers. Shanker noted, “If there are difficulties with one great power in the neighborhood, India would like to have the flexibility to have good relations with the other great power and not push it completely into the Chinese corner.”
India’s economic strategy of protecting local industries through high tariffs on foreign goods is one that Trump has publicly criticized, but it is integral to the nation’s economic policy. Dr. Ajai Sahai, director-general and CEO of the Federation of Indian Export Organisations, noted that India’s current tariffs are designed to help domestic companies develop and achieve stability in the market before facing full international competition. “Tariffs are not here to stay,” Sahai explained, suggesting that India’s government aims to provide a “3-to-4-year framework” for local industries to scale up and become competitive on the global stage.
Trump’s objections to these tariffs might prompt new challenges for Indian exporters. While India’s policy is primarily geared towards strengthening domestic firms, a renewed trade war could threaten India’s growth in several industries. Experts warn that escalating trade tensions may also discourage US businesses from investing in India, potentially stunting the job creation that results from foreign direct investment.
Another complex layer to the US-India relationship stems from recent allegations of espionage and assassination plots involving Indian government officials on foreign soil. Last month, the US Justice Department announced charges against Vikash Yadav, a former Indian government employee accused of participating in a murder-for-hire scheme. Though the investigation is ongoing, Washington’s allegations have raised questions about India’s diplomatic posture, with Canada lodging similar accusations.
The escalating tension over these allegations could force the next US administration to demand greater transparency and accountability from India. This new chapter of diplomatic strain risks overshadowing the progress made in trade and strategic partnerships. Should either Trump or Harris assume office, the pressure may mount for more stringent diplomatic policies, putting India in a challenging position as it navigates its role in the international community.
With the election just days away, the stakes for the US-India relationship are high. A second Trump term could mean heightened trade tensions, a more protectionist US trade policy, and potentially erratic diplomatic shifts. On the other hand, a Harris presidency could signify a continuation of Biden’s Indo-Pacific strategy and collaborative defense initiatives, albeit with the caveat of possible human rights scrutiny and pressure on India’s relations with Russia.
The outcome of the election will undoubtedly shape the future of the US-India partnership, which holds significance not only for both nations but also for the balance of power across Asia. Indian policymakers and businesses, like Alpine Apparels, will need to remain vigilant and adapt to the policies and strategies that unfold with the changing US administration.
