Trump Win: India Impact
Source: Dam Capital
It seems that Trump has won the US elections, with majority in both Houses. We will know with
complete certainty on: a) Dec 17: Electoral college vote, b) Jan 6: Cong counts & confirms the same,
c) Jan 21: swearing in. The effect on India of this win is more indirect and marginal vs. that of say
Ukraine, China, Iran, Western Europe. We may not “live in interesting times” as much as them.
The main impact on India potentially include increased tariffs, reduced US corporate tax rates,
Make in USA, and H1B visa tightening. Note that the 2 global issues, ie Fed rate cuts and Chinese
growth/ stimuli are as or even more important than Trump’s policies in our context. The
following are an overarching list of considerations for India:
1. INR: The impact on USD/INR due to any safe haven move to the USD can be significant, as our
currency impacts Twin deficit which in turn again impacts the INR, exacerbating any virtuous/
vicious cycle already underway. This overarching currency effect on macro is unlike that in most
other major countries where largely only exports are impacted.
2. INR & Tariffs: Any tariff increases by US (India being categorized as “currency manipulator”)
could lead to global competitive currency devaluation. This is a worry for our macro as well as
our US exports such as auto & components (esp. Bharat Forge), jewelry, electronics (but it
could be a boost for our China+1), solar modules, textiles. The effect on chemicals & pharma is
more uncertain, since for our exports we use sizeable input imports from China , where the
eventual Yuan rate will also affect us.
3. China:
a. Our major competition for EM flows is China, whose stimulus policies will be re-
enunciated by Friday. If China sees a greater threat to its growth, it may announce further
stimuli.
b. We guesstimate Yuan to competitively depreciate by 10-15% wrt USD to mitigate US tariff
increases, resulting in global competitive depreciation of currencies including INR.
c. There is genuine disinflation in China due to slowdown, apart from the government
subsidizing its industry. Hence increased tariffs on China may result in greater dumping
on India, which may be difficult for us to prove and counter with anti- dumping duties.
Esp. vulnerable are solar (PV cells), steel, chemicals, plastic, electrical machinery and
components, pharma, textiles.
4. Policies actually implemented:
a. Politicians usually do not talk about the harsher measures required to mitigate the very
obvious downsides of any populist measure they announce in the campaigns.
b. Policy Approvals: Republicans have won the Senate and have a lead in the House of
Representatives at the time of writing. President can decide without Congress approval, on
Tariffs and Immigration (H1B visas for our IT). However he will need Congress approval
for Corporate Tax cuts and Fiscal Spends.
c. The US is unlikely to use a blunt hammer to solve each issue, and will implement each policy
as it best suits its self-interest. For eg, its tariff increases are apparently based on 3
considerations, ie trade balances, currency manipulation & China threat to security in
particular. India comes mostly in the 2nd category, hence it is possible that some negotiations
will occur about mutual tariffs on specified items rather than a blanket increase and a tariff
war as it could be for China.
5. Sectoral Drivers: For each of our major sectors apparently affected by US policies, there are FAR
greater drivers unrelated to the same:
A. IT sector growth primarily depends on i) how much AI LLM application work will come
to us + ii) increase in IT Budgets of US Inc. as Presidential uncertainty is removed + iii) Fed
rate cut impact on growth.
B. The relatively less important direct effects of potential US policy changes are: Reduced
Corporate Tax + Make-in-America (to help loosen US IT budgets).
C. US Tax cuts would help Indian IT subsidiaries, US Banking recovery to esp. help Mphasis,
any tightening of Visa restrictions may not affect Infy/ Wipro as much as others, as they
are more localized.
D. On commodities (metals, and inputs for FMCG), this will depend as much on Chinese
growth and global competitive currency devaluation as on end of the Ukraine war.
E. For pharma, the key consideration is the pipeline of drugs going off-patent. This is more
important than the effect of tariffs on India & China.
F. On Oil, there’s likely to be high global refineries shutdown next year resulting in high
GRMs. Note, that US has to export its oil to Europe & buy from Saudi as its refineries are
not most efficient in refining local oil. Trump means to loosen oil supplies and logistics in
the US, which is not as important as the above factor.
Sector Impacted Impact Policy Probability Comments
IT Positive Corporate High Lower corporate tax in US can benefit
tax the US economy loosening IT Budgets
(+ve)/Visa & Indian IT subsidiaries in the US.
(-ve)/rate Make In USA also helps Indian IT
cuts (+ve) providers. However, sentiments
towards visas might be negative for
companies seeking H1B visas for
certain projects. Companies where
localization levels are high eg INFY
and Wipro should not be impacted
with this.
From the perspective of rate cuts,
irrespective of the government in the
US, Indian IT will be benefited
because of likely improvement in
discretionary spending. Moreover,
with US elections over, uncertainty
will end, which can infuse more
private capex (higher budget release)
in the country thereby again
benefitting Indian IT companies.
Auto Ancillary Negative Tariff High Bharat Forge exports sizable auto
Hike components to the US.
Electronics Positive China High With improving US and India trade
tariffs relations, this can potentially drive
strong exports of electronics goods
from India, which are quite low today.
Potentially any exports of mobiles,
RACs, PCBAs could be positive for
players like Dixon, Amber, Havells,
Avalon, Syrma
Solar Negative Tariff High Module exporters to US
Hike
Metals Neutral China High Given existing US tariffs on Chinese
tariffs/ metals, there are marginal exports to
currency US, hence no fear of ADDITIONAL
dumping on India. We are assuming a
stable DXY despite Fed rate cuts,
hence no effect on prices; however a
DXY fall would buoy steel prices.
Pharma & Specialty Positive Tariff High Higher tariffs on China’s pharma
Chemicals Hike (- exports to US could benefit sector;
ve)/ Tariff hike on India exports to US
China negative but likely to be countered by
tariffs rupee depreciation.
(+ve)
Oil & Gas Negative Increase High A potential fossil fuel market share
(Upstream) fossil fuel war will lead to lower oil and gas
and prices, directly impacting Indian
positive upstream realisations. OMCs would
(OMCs, not benefit directly but sentimentally
gas as lower oil prices lower volatility in
utilities) marketing margins. With India being
a very price sensitive market for gas, a
lower gas price would lead to higher
adoption of gas and would
particularly benefit gas utilities like
PLNG and GAIL directly and
Industrial players like Gujarat Gas.
6. Key Macro drivers (Fed cut not the MOST important driver):
A. Inflation: In the West, a key macro driver is interest rates, as the largest components on
inflation (& growth) are driven by assets owned or on loan (housing, auto, etc.). These
have both cyclical & secular elements with some degree of predictability. Hence the Fed
rate cut is KEY to growth in the West. The highest components of Indian inflation
however, are driven (including indirectly) by Food and “Crood” (spelt for easier vocal
recall), which are highly volatile and unpredictable elements, apart from housing.
B. Consumption & Capex: Our weak Consumption degrowth of late is related to high input
costs, income shocks related to weather & govt spends, stricter lending regulation, rather
than interest rates. Our private Capex is more related to Govt spend, global demand
outlook, ease of business, etc. than just interest rates. Note however, that the festival sales
in October and Govt spend in September have bumped up a lot.
C. Interest rates: Having said that, an expected Front loading of Fed rate cuts under a
Trump regime (to offset the lagged inflationary effect of tax cuts & tariffs) would benefit
our BFSI sector, esp. housing & auto financiers & the reeling micro finance sector.
D. Macro expectations: Indian interest rate cuts are expected at 75 bps in CY2025 vs. Fed’s
further 150 bps. INR to depreciate to average 84.75 in FY26. While normally a Fed rate
cut leads to DXY weakness, in a slowing globe, competitive currency depreciation &
interest rate cuts would instead lead to DXY appreciation: expect rise from current 104 to
average 105 in FY26.
