NEW DELHI, Nov. 5 -- US President Donald Trump's political setback in the midterm elections could reduce the threat of sudden tariff increases and provide India with greater negotiating flexibility in its trade discussions with Washington, although uncertainty over American trade policy is expected to persist, according to a report by Emkay Research.
The report said the election outcome was unlikely to bring significant changes to the existing US tariff structure but could influence the administration's approach towards its trading partners. With Democrats securing control of both chambers of Congress, Trump could face greater political and legislative constraints in pursuing fresh trade restrictions.
According to Emkay Research, the changed political environment could encourage the administration to focus more on consumer affordability and securing trade agreements ahead of the 2028 presidential election, rather than relying heavily on tariff escalation as a negotiating instrument.
The report identified fewer opportunities for introducing fresh trade restrictions, increased pressure to address household costs and a greater emphasis on concluding agreements as factors likely to shape Washington's trade strategy following the midterm elections.
It noted that future tariff increases could increasingly require formal investigations under Section 301 of the Trade Act of 1974 or Section 232 of the Trade Expansion Act of 1962. Such procedures could make abrupt tariff announcements less frequent and provide trading partners with greater predictability.
For India, the changed circumstances could reduce the urgency of concluding a bilateral trade agreement with the United States, potentially allowing New Delhi to negotiate from a stronger position.
The report highlighted that the previously proposed 18 per cent tariff framework had never been implemented, while Indian goods currently faced a lower 10 per cent duty under Section 301.
It also noted that Washington had lost an important source of negotiating leverage following restrictions on the use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs.
The developments could provide Indian negotiators with additional flexibility in discussions concerning market access, tariff reductions and other trade-related commitments.
However, Emkay Research cautioned that the midterm results did not eliminate the possibility of renewed trade pressure, particularly because the US President retained considerable executive authority over trade measures.
The report observed that trade policy remained one of the areas in which Trump could continue exercising substantial independent control, suggesting that fluctuations in tariff-related announcements and negotiations were likely to continue despite the altered balance of power in Congress.
Sector-specific duties imposed under Section 232 remained a particular concern for Indian exporters, especially those operating in pharmaceuticals and electronics.
These sectors are important components of India's export relationship with the United States, and any additional restrictions could affect their competitiveness in the American market.
The report also warned that geopolitical developments involving Russia and Iran could complicate India's trade relationship with Washington.
Any deterioration in diplomatic efforts concerning these countries could revive American pressure over India's crude oil imports, potentially exposing Indian exporters to additional trade restrictions.
India has consistently maintained that its energy procurement decisions are guided by national interests, affordability and the need to ensure reliable supplies for domestic consumers.
The possibility of renewed pressure over oil purchases remains an important consideration in bilateral trade negotiations, particularly amid continuing instability in West Asia and disruptions to international energy markets.
Emkay Research said the changed political environment in Washington could nevertheless create a relatively more favourable backdrop for India by reducing the likelihood of sudden tariff shocks.
A moderation in global crude oil prices and a weaker US dollar could also provide support to the Indian economy, particularly through their impact on import costs, currency movements and export competitiveness.
Lower oil prices could ease pressure on India's import bill, while reduced tariff uncertainty could improve business confidence among exporters dealing with the American market.
The report suggested that these developments could gradually reduce the risk premium associated with Indian financial assets and provide some support to the rupee.
However, it cautioned that the potential benefits might remain limited because of India's continuing current account financing requirements and uncertainties in global financial markets.
The findings come amid broader assessments of the implications of the Democratic Party's midterm victories for the Trump administration's economic and foreign policies.
The election results have raised questions about Washington's ability to introduce additional trade restrictions without facing increased congressional scrutiny.
Nevertheless, analysts have cautioned that a change in congressional control does not automatically translate into a reversal of existing tariffs or a fundamental shift in American trade policy.
For India, the immediate priority remains securing a trade arrangement that provides meaningful market access while protecting domestic economic interests.
The Emkay Research report indicated that although the midterm setback could soften Washington's negotiating approach, New Delhi would still need to account for sector-specific tariffs, geopolitical pressures and the possibility of further unilateral trade measures.
It concluded that India's trade outlook could benefit from reduced tariff volatility, softer crude prices and a weaker dollar, but the extent of that relief would depend on subsequent policy decisions by the Trump administration and developments in the global economy.
Published by HT Digital Content Services with permission from Millennium Post.