Context

• The inauguration of Donald Trump as President of the United States marked a dramatic shift in American policy, characterised by sweeping executive orders, stringent immigration measures, aggressive trade policies, and a focus on artificial intelligence (AI).
• While these policies align with Trump’s vision of ‘America First,’ they have profound implications for global geopolitics, particularly for India.
• The trajectory of U.S.-India relations, which had been on an upward trend for over two decades, now faces challenges that require careful diplomatic navigation.

Immigration Crackdown and Its Repercussions

• Mass Deportations and Economic Consequences
  • Trump’s administration has taken a hardline approach to deporting illegal immigrants, a move that will affect a significant number of Indians.
  • According to Pew Research estimates, around 725,000 Indians are undocumented in the U.S., making them one of the largest immigrant groups at risk of deportation.
  • Additionally, more than 18,000 Indians are currently in detention centres, awaiting removal.
  • If the Trump administration escalates deportation flights, as it did in its first term, India will face multiple economic and social challenges.
• Repercussions on India
  • Loss of Remittances
    • India will lose a substantial source of remittances, as many undocumented immigrants send money back home to support their families.
    • Remittances form an essential part of India’s foreign exchange reserves, contributing to the country’s economic stability.
    • A sudden decline in these inflows could impact household incomes and increase financial distress in many communities.
  • Employment Challenges for Deported Individuals
    • The return of thousands of deported individuals will add pressure to India’s already-strained job market.
    • With unemployment rates fluctuating and job creation still a challenge, reintegrating a large number of returnees will require significant policy interventions, including skill development programs and economic reintegration strategies.
    • Many of these deportees, having lived in the U.S. for years, may struggle to adjust to the Indian job market, where opportunities, salaries, and working conditions are vastly different.
  • Economic Effect
    • Trump’s use of economic coercion to enforce compliance on immigration policies is a growing concern.
    • His administration has already demonstrated a willingness to impose heavy tariffs on countries that refuse to accept deported nationals.
    • For instance, Colombia faced a 25% tariff threat unless it agreed to accept deportations without conditions.
    • If India resists accepting deportees, it may face similar economic consequences, potentially leading to higher tariffs on Indian exports or restrictions on trade agreements.
• Impact on Indian Students and the Education Sector
  • Another area of concern is Trump’s hostile stance towards international students.
  • The U.S. is the most popular destination for Indian students pursuing higher education, particularly in STEM fields.
  • Many of these students hope to transition to H-1B visas and settle in the U.S.
  • However, with increasing visa restrictions and uncertainties surrounding Optional Practical Training (OPT) programs, the attractiveness of U.S. universities may decline.
  • As a result, India might see a decline in student enrolments in American institutions, impacting both students and U.S. universities, which benefit from international tuition fees.

Trade Policies and the Weaponization of Tariffs

• Trump’s trade policies, centred on the ‘America First’ doctrine, pose another major challenge for India.
• His administration has demonstrated a willingness to leverage tariffs as a tool of economic coercion, as seen in his threats to impose heavy tariffs on countries that resist U.S. immigration policies.
• In his first term, India quietly accepted the withdrawal of its Generalised System of Preferences (GSP) status, which had granted tariff-free access to many Indian exports.
• A continuation of such policies in Trump’s second term could further strain India’s trade relationship with the U.S.
• Moreover, Trump’s unpredictable stance on China complicates matters for India.
• While he has threatened tariffs on Chinese goods, his conciliatory gestures towards President Xi Jinping and a softer-than-expected tariff policy suggest a potential shift towards U.S.-China cooperation.
• If such a shift materialises, it could disrupt India’s economic strategy, which has been geared towards capitalising on U.S.-China tensions to attract investments and strengthen its own manufacturing sector.

The AI Disruption and Its Impact on Indian IT Professionals

• Perhaps the most far-reaching economic consequence of Trump’s second term is his aggressive push for artificial intelligence development.
• The $500 billion Stargate AI Infrastructure project signals the U.S.’s intent to dominate the AI landscape, potentially at the expense of foreign tech workers.
• By advancing AI capabilities, Trump’s administration aims to reduce dependence on human labour, including the Indian IT professionals who have long formed the backbone of Silicon Valley’s workforce.
• The shift towards AI-driven automation poses a dual threat to India.
• First, it could limit employment opportunities for Indian software engineers and tech professionals in the U.S.
• Second, if U.S. companies begin replacing human workers with AI-generated code, India’s IT-BPM sector, which contributes significantly to its GDP and exports, may face an existential challenge.
• Industry leaders like Sundar Pichai and Mark Zuckerberg have already indicated that AI-generated code is becoming increasingly prevalent, raising concerns about job security in the tech industry.

The Way Forward for India to Deal with Trumperica

• While the symbolic aspects of the U.S.-India relationship remain strong, the economic realities suggest a more cautious approach.
• India must engage in proactive diplomacy to mitigate the effects of restrictive immigration policies, protect its trade interests against tariff threats, and prepare for the disruptive impact of AI on its workforce.
• Expanding job opportunities at home: With skilled professionals facing difficulties in the U.S., India must strengthen its startup ecosystem, technology sector, and manufacturing industries to absorb returning talent.
• Reforming higher education: India should enhance the quality of STEM education and research opportunities to ensure that students who cannot go abroad still have world-class educational prospects.
• Strengthening diplomatic efforts: India must negotiate with the U.S. to secure better visa policies, especially for skilled professionals, students, and family reunifications.

Conclusion

• Trump’s policies present India with a complex set of challenges that span immigration, trade, and technology.
• As New Delhi prepares for high-level engagements with Washington, it must prioritise strategic economic planning to navigate these evolving dynamics.
• The era of Trumperica demands not only diplomatic finesse but also robust domestic policies to safeguard India’s economic future in an increasingly uncertain global landscape.