As Donald Trump gears up for a second term in the White House, one of the key dynamics to watch will be the evolution of Indo-US relations, particularly in trade and semiconductors. While Trump’s first term was marked by protectionist policies and a tough stance against China, his second administration could lead to significant shifts in global trade, with India emerging as a key partner. This evolving relationship holds promise for India, especially in light of the ongoing geopolitical tensions with China and India’s aspirations in high-tech manufacturing.

Trade Relations: Shifting Focus from China to India

The trade relationship between India and the United States has been steadily growing, and experts predict it will continue to expand under Trump’s leadership. Prof David J Meyer, Dean of Woxsen University’s School of Business, points to the potential for this trend to accelerate: “The already rapidly growing trade relationship between the US and India is likely to rise even further with the advent of the second Trump administration.”

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Trump’s admiration for India and its people has been a consistent theme throughout his political career. He has shown particular support for figures of Indian origin, including appointing Nikki Haley, a former governor of South Carolina and of Sikh origin, as US Ambassador to the UN. Additionally, Trump’s relationships with other Indian-American figures, such as Vivek Ramaswamy, suggest that India will continue to have a prominent place in his foreign policy. 

Prof. Meyer adds, “Trump has cultivated close ties with influential Indian-American figures, which could translate into deeper economic cooperation between the two countries.”

One of the most significant changes that could emerge under Trump’s second term is the shift in US manufacturing away from China to India. As tensions with China continue to escalate, the United States is increasingly seeking alternatives to the Asian giant for both trade and manufacturing. “Americans of both parties are enraged by China’s aggressive mercantilism and open threats,” Prof. Meyer notes.

However, this shift won’t be without its challenges. Both countries will need to address issues like mutual tariffs, over-regulation, and infrastructure improvements to truly capitalize on the growing trade potential. Prof Meyer underscores that addressing these obstacles will be crucial for sustaining the momentum in US-India trade relations. “Progress in these areas is likely to greatly stimulate the already dynamic growth of US-India trade,” he concludes.

India’s Semiconductor Ambitions: Trump’s Policies and Opportunities in Chip Manufacturing

Another critical area for collaboration between India and the US under a second Trump administration will be in the semiconductor industry. As global demand for semiconductors grows, particularly in technologies like 5G, artificial intelligence (AI), and the Internet of Things (IoT), India has positioned itself as a potential hub for chip manufacturing. Dr Milind Pande, Pro Vice Chancellor at MIT Pune, and Dr Aavishkar Katti, Assistant Professor at MIT Pune, explain the strategic importance of semiconductors for India’s future:

“Semiconductors are crucial for a range of electronics and photonics equipment. Their significance is underscored by the fact that disruptions in the supply chain due to the COVID pandemic impacted various industries across domains. The semiconductor chip, the core of electronic ecosystems, is crucial for future technologies like 5G, AI, IoT, and the 5th Industrial Revolution.”

India has already launched initiatives to develop its semiconductor industry, offering subsidies, technology transfer, and a welcoming business environment to attract foreign investments. The US, under Trump’s leadership, could play a pivotal role in advancing these ambitions, despite his protectionist stance.

Trump’s economic policies, particularly trade restrictions on China and Taiwan, are expected to have a significant impact on the semiconductor market. During his first term, the Trump administration-imposed sanctions on Chinese companies like Huawei and pushed for greater tariffs on semiconductor imports. As the US continues to distance itself from China economically, it is predicted that India will benefit from the US-China trade war.

Both Pande and Katti highlight that Trump’s protectionist policies could inadvertently boost India’s semiconductor industry: “The ongoing US-China polarization might exacerbate the tensions in the geopolitical sphere, which may result in disruptions to the global supply chain of semiconductors. In this context, India stands to benefit.” With Trump expected to erect more trade barriers against China, India could become an important player in supplying semiconductors to meet the growing demand in the US and other markets.

Another key factor in this growing collaboration is the US-India Initiative on Critical and Emerging Technologies (iCET), launched in 2022 by President Biden and Prime Minister Modi. This initiative focuses on strengthening semiconductor supply chains, improving labour force skills, and boosting India’s semiconductor design and manufacturing ecosystem. Despite Trump’s protectionist policies, Pande and Katti believe that the US-India partnership in semiconductors will continue to grow, especially given its alignment with the China + 1 strategy, which encourages diversification of supply chains away from China.

In conclusion, India stands to gain significantly from the evolving geopolitical landscape under Trump’s second term, particularly in the semiconductor sector. However, India will need to scale up its manufacturing capabilities and manage potential challenges related to supply chain bottlenecks.