US President Donald Trump has suffered a major political setback in the midterm elections. The opposition Democratic Party has taken control of both houses of the US Parliament (House and Senate). This changed political environment in Washington has opened the door of relief for New Delhi. Business experts believe that the American pressure on India in the proposed Bilateral Trade Agreement (BTA) will decrease significantly after this election result. Now India can finalize a balanced deal according to its needs.
Trump’s arbitrariness will be curbed
As reported by the Economic Times, the election results have changed the entire equation. The power of the American President will now be limited as the Parliament will not give him free rein to take arbitrary decisions. Experts say the balance at the negotiating table has now tilted in favor of India. This will reduce the pressure on the Government of India. Taking advantage of the changed circumstances, a balanced compromise can be reached, which now seems entirely possible. Since Congress has trade-related powers, the possibility of raising tariffs without thinking through the rest of Trump’s term is over. Just last month, US Secretary of State Marco Rubio said that Washington is very close to finalizing a trade deal with India.
Tariff may be reviewed again
Madan Sabnavis, chief economist at Bank of Baroda, believes the election results are unlikely to change the existing provisions of key trade agreements. However, tariffs can certainly be reviewed. According to Sabnavis, if American citizens feel that higher tariffs are causing inflation in the US, a review of rates is possible. This move will directly benefit many countries including India.
Vijay Aggarwal, former chairman of the Textile Export Promotion Council, said a Democratic Party victory would increase parliamentary scrutiny of Trump’s tariff policies. This will give Indian textile exporters an opportunity to get better terms. He also clarified that no immediate change is expected in the current 18 percent tariff. There may be some delay or uncertainty in the deal, so India should maintain constant contact with the Trump administration as well as the Democratic controlled parliament.
Small businesses need a stable environment
America is the largest export market for India. Director General of the Federation of Indian Export Organizations (FIEO) Ajay Sahai says that the most important thing for Indian exporters in the coming months will be how the US policy on market access, apart from tariffs, takes shape. Small and medium enterprises (MSMEs), in particular, need a stable trading environment to determine the right price for their orders. Based on this, they plan their shipments months in advance. If we look at the figures, Indian exports to the US rose 11 percent year-on-year to $50.8 billion in the first half of fiscal year 2027 (FY27). India’s imports also increased by 26 percent to $32.3 billion during the same period.
The math changed because of a Supreme Court decision
In February, the two countries drafted a framework for the first phase of the BTA. In this, the US promised to withdraw an additional 25 percent tariff imposed on Indian imports related to the purchase of Russian oil. Also, it was agreed to reduce the reciprocal tariff to 18 percent. But on February 20, the US Supreme Court struck down these reciprocal tariffs imposed under the International Emergency Economic Powers Act (IEEPA).
Following this move by the Supreme Court, the US has imposed a new duty of 10 percent on Indian goods under Section 301, which deals with the investigation of alleged cases of forced labour. Apart from India, this rule has also been implemented in 16 other countries. However, this rate is lower than the 12.5 percent tariff proposed by Washington in June. Now, after the change of power in the US Parliament, Indian exporters hope that trade related rules will become clearer.
