A breather or new worries? US midterm elections ain't so simple for India

It’s advantage India, as the US midterm election results give a rude wake-up call to President Donald Trump. For India’s trade negotiators and strategists, this gives a lovely window of opportunity. The only question is how long this breather will last. The answer is complex.

“The US election weakens Trump's hand because it shows that his policies are very unpopular. Tariff policy in particular is polling very poorly in the US. This should make it easier to strike a deal,” Rahul Ahluwalia, ex-NITI Aayog and founder of the Foundation for Economic Development, said.

However, trade deals and tariffs are only one side of the whole India-US slow dance we have been witnessing since Trump’s ‘second coming’ in January 2025. There are problem areas galore, ranging from the heavy-handed Russian Oil Act, which allows the US to penalise the likes of India for buying oil from Russia, as well as the H1B crackdown on Indian IT.

And the biggest fear could well be worrying what might actually be the lesser evil — an unbridled Trump throwing tantrums, or a new system where activist-minded Democrats hold the whip, and don’t mind cracking it on India on everything ranging from immigration to oil purchases to the environment.

India’s ministries, ranging from external affairs to commerce & industry are said to have considered various permutations of strategies as per the various eventualities expected. A Trump unleashed, suppose the GOP retained control of both Houses, or, as seems to have turned out, opposition Democrats taking control of both the House of Representatives as well as the Senate and bringing in their playbook—and every possibility in between.

While there is immediate optimism, experts and policymakers also worry that the chaotic turn of geopolitics in recent years is nowhere near calming down. The reasons are two: One, Trump is not one to go meekly into the sunset, and that could well mean him getting overactive on the Iran front, or, say, on immigration. With the former a sure-fire way to shoot up oil prices, the latter could also pain India’s balance-of-payments crisis at such a critical time.

The second is Democrats and their lofty left-liberal slant, and this could also be troublesome for India in the long run, on anything from Kashmir to human rights record and the environment. Especially if they feel (and many Dems do) that isolating Russia (which in India’s case would mean supporting any Trump decision to penalise India for purchasing oil from Russia) is the quickest way to end the Ukraine war.

While India-US trade talks have been laborious and hair-splitting, there is renewed hope, at least now even if it doesn’t last, that there is a better chance to get the India-US Bilateral Treaty Agreement (BTA) done. As Kirit Bhansali, chairman of the Gems & Jewellery Export Promotion Council, said, “While the change in the composition of Congress may influence the legislative environment and discussions on trade policy, we remain hopeful that the momentum towards the proposed India–US Bilateral Trade Agreement (BTA) will continue. The tariffs introduced earlier were executive measures and were not enacted through congressional legislation. We believe sustained dialogue and constructive engagement between the two governments will help address outstanding trade concerns.”

“We look forward to an early conclusion of the BTA,” he said. As for which way the value of the rupee and the cost of oil imports go, those results are yet to come in.