Trump's midterm setback may give India an edge in trade deal
New Delhi: The US has sought to allay concerns that the Republicans’ midterm election defeat could derail trade talks with India, with an American embassy spokesperson telling Mint that President Donald Trump remains firmly in charge of Washington’s trade agenda.
Experts in India see challenges as well as opportunity from the development. While a Democrat-controlled Congress could make the ratification of a trade deal harder to accomplish, Trump’s political setback may also give New Delhi greater leverage at the negotiating table.
President Trump “remains firmly in command” of the country's foreign policy, including the trade agenda, the embassy spokesperson in New Delhi, said. “The midterm election results do not change our commitment to strengthening our partnership (with India),” the spokesperson said in response to Mint’s query on whether the Democratic control of the Congress would in any way impact the ongoing trade deal negotiations.
American voters have given the opposition Democratic Party control of the US Congress and flipped key gubernatorial posts. Trump’s Republican Party faced stunning defeats in its strongholds such as Texas, Georgia, Iowa and Ohio, where it lost the governors’ posts to the Democrats.
Indian strategic and trade experts reckoned that the setback to Trump's party could bring in fresh uncertainty over the trade deal prospects. Any agreement on the trade deal will need the Congress backing to be ratified, complicating the path to a final deal, they said.
“I think it would be very difficult for Trump to give us substantial comparative advantage in the trade deal vis-a-vis our competitors, as there is uncertainty now over Congress’ backing to any such deal,” said Jayant Dasgupta, former Indian Ambassador to the World Trade Organization.
But the result also opens a window to repair ties strained in recent years over India's purchases of Russian oil, with New Delhi asserting it will take all necessary steps to ensure its energy security amid geopolitical conflicts that have disrupted supplies and pushed up oil prices.
A White House facing fresh political constraints may now be more willing to accommodate India’s concerns, while New Delhi could enter any fresh rounds of talks with a stronger leverage, experts said.
“India now has greater leverage, and I hope we use it well,” said Biswajit Dhar, economist and a former professor at the Jawaharlal Nehru University.
Commerce and industry minister Piyush Goyal had last month exuded optimism about an early closure and operationalization of the trade agreement, but only after India secures an export advantage over its competitors.
The US is India’s largest export market. India’s exports to the US were at $87 billion last fiscal.
Queries on the impact of the US midterm election result on India emailed to the spokespersons for the ministries of finance and external affairs did not receive an immediate response. A spokesperson for the commerce and industry ministry declined to comment.
Energy and markets
The poll outcome could calm the global oil markets if Trump steps back from escalating the ongoing war in West Asia, the experts said. But some flagged near-term risk of escalation in tensions in West Asia before the new Congress convenes in January.
Trump’s tariff strategy and war policies may face increased US Congress scrutiny in the coming months, which may result in unintended uncertainties in terms of trade policies towards India and investment flows, they said.
Brent futures were down 8.9% to $94.29 a barrel at 10.45 PM, the lowest level since 4 September, as Trump played down the prospect of Iran strikes following the Democratic sweep. Stocks of AI companies tumbled, as investors braced for greater regulation.
The Indian rupee stayed firm for the second straight session to settle 29 paise higher at 94.46 against the dollar, supported by easing crude oil prices. As of 10.45 pm pm India time, the Dow Jones Industrial Average was up 2.9%, while the Nasdaq composite was up 2.1% higher. The Gift Nifty traded up 1.75%, indicating a strong opening for the local market.
Some policy experts advised a wait-and-watch policy for India. “We have to wait to assess how Trump may react post midterm defeat, as given his personality, he may become more reactive towards India and internationally to distract domestic public attention,” said Ram Singh, an international trade expert and a professor at IIFT, New Delhi.
Energy experts expect some measure of stability in the global oil market. Manas Majumdar, leader, oil and gas at PwC noted that the results may restrict a further escalation in the war with Iran, thereby easing oil prices.
"This will put a curb on Trump. Although it may not result in an immediate policy change, it may lead to a faster closure to the war against Iran, which will ease the prices of oil," Majumdar said.
The Democrats have been largely against Trump's tariff regime, so some relief on that front is expected, said Prashant Vashisht, senior vice-president and co-group head, corporate ratings, at Icra Ratings.