Reset will keep India busy as Trump’s midterm loss redraws US politics

What do the US midterm elections mean for America, India and the world? Boilerplate assessments were offered even before Nov 3. For instance, the president still retains enormous executive authority, especially on foreign policy. Alternatively, a horseshoe is forming in US society, with the extreme left and right taking similar positions on immigration and trade protectionism.

While all of this is true, it is also facile, and somewhat theoretical. Every election takes place in a context. There are near-term triggers and consequences. Anticipating the Trump presidency’s future, watch 3 points:

What does Trump do next?

This question falls into three timelines: immediately (as in this week, and the coming days); the period till January 2027, when Congress meets in Washington; and the following two years, when the presidency enters its final leg in a polarised polity.


Also Read: One giant leap for America? Trump's Moon ambitions put India's space diplomacy to the test

Each of these periods offers a different indicator. Will Trump look for an instant diversion from voter rebuke and renew assault on Iran? How will he use executive privilege in the two months before Congress convenes? Coincidentally, any PM of Israel — caretaker, re-elected or newly-chosen — too, will have room till January. That is when he will need to get the budget passed and face the equivalent of a confidence vote.

These eight weeks are a corridor of uncertainty for the international system, particularly for the Persian Gulf region, its neighbours and stakeholders. For India, a renewal of hostilities will mean higher energy prices and disrupted supply chains. It will also place pressure on the rupee. However, if the conflict is avoided or designed as Trumpian showboating — escalating to deescalate — then India can absorb the temporary pain.

The real concern is a much longer conflict stretching well into 2027. Here, the fact that the US Congress is in the Democrats’ grip, and the inflationary outcome of the war has proven to be unpopular with American voters, is reassuring. Hopefully, these will restrain Trump’s war planners.

What happens to the trade deal, and India’s economic prospects more broadly?

New Delhi is happy to close the text of the bilateral trade agreement (BTA). Washington’s negotiators are less willing and have injected fresh issues.

One reason is, there is no directive from the White House to USTR to finalise the text. Trump has made the BTA contingent on a tariff number (for Indian exports to the US) that he will impose. This, in turn, is linked to tariffs on other countries — Bangladesh, Indonesia, Vietnam and so on — with which India competes in high-volume export categories.

Also Read: Trump admits Iran war hurt Republicans in midterms but says ‘Iran thing’ had to be done

The legal architecture for tariffs on India and the relevant set of countries has not been completed. Till then, even if the BTA text is closed, it cannot be operationalised. Now, with Houses of Congress swinging in an anti-tariff direction, the legal architecture is even more indefinite. As such, Trump doesn’t gain anything by signing the BTA text with India.

Nevertheless, India will likely continue to offer to close the text of the agreement. It will continue to keep the US engaged on the trade deal. This is sensible atmospherics as it prepares to sign — and operationalise — trade agreements with the EU and Canada at the end of 2027. It is also a calming message to investors and business corporations from both the US and third countries that look to a stable — even if underperforming — New Delhi-Washington dynamic.

Other economic opportunities will open as well. The midterm results take global stock markets that much closer to the end of the AI bubble process. Should that happen, re-allocation of investor money is inevitable. To whatever degree, Indian equities will benefit.

Further, US corporations will attempt to derisk from not just the Trump coterie but also the internecine and corrosive politics of battleground Washington. Overseas markets and partners will get attention. From tech to defence, pharma to finance, India should sense an uptick.

What does this mean for the overall India-US relationship?

For 25 yrs, this has had 3 drivers: the diaspora as a living bridge; the strategic bucket (China, the Indo-Pacific); business and commerce. These balls are still in play. But the Trumpian years have altered the weights. The business and commerce weight is greatest today. Marco Rubio’s visit to Mumbai and Jamnagar last month was a demonstration.

In an edgy, transactional America, where any president (from any party) will have rapacious domestic economic constituencies to satisfy, this trend will endure. In that narrow sense, the midterms are outcome-neutral. Trump has changed the India approach forever, at least the medium-term forever.

A reset of US politics will keep Indian diplomats busy. New actors on the Hill — including Democrats with little India history — new governors, and new social coalitions in individual states will require cultivation and education about India’s credentials. Texas is a case in point. It is a key partner for tech, energy and healthcare.

In sum, restoration of institutional balance and of America’s natural internal multipolarity should be interpreted favourably by the Modi government.