US Election 2024 | Trump vs Harris: What's at stake for Indian equities, trade?
India and the United States have a significant trade partnership; the US is India's largest export destination absorbing about 18% of India's merchandise exports. Export product focus is electronics, pearls, pharmaceuticals, oil products and automobiles but with a focus on services.
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FollowAs the United States gears up for a closely contested election, global financial markets are already bracing for its potential outcomes. There are expectations for considerable changes in relation to sectors in case of a Trump victory during the November 2024 polls according to experts especially those in India. Analysts have claimed that the return of Trump may have a positive impact on India's auto, energy and metals sectors, while, exports of pharmaceutical might not be greatly affected.
India and the United States have a significant trade partnership; the US is India's largest export destination absorbing about 18% of India's merchandise exports. Export product focus is electronics, pearls, pharmaceuticals, oil products and automobiles but with a focus on services. The potential policy shifts under Trump could mean significant trade impacts, particularly through proposed tariffs.
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Nigel Green, CEO of global consultancy deVere Group, suggests that if Trump implements expected trade policies, including a 10 percent blanket import tariff and a 60 percent tariff on Chinese imports, inflation could rise as import costs increase. This might lead the U.S. Federal Reserve (US Fed) to moderate its rate-cutting stance to counteract inflationary pressures, balancing inflation control with economic growth.
"Investors are recalibrating portfolios to leverage a potentially stronger dollar and preparing for the inflationary effects of Trump’s trade policies," Green stated.
Meanwhile, analysts at HSBC warn that Trump's tariff proposals could impact U.S. earnings, potentially shaving off up to 8 percent. The tariffs would likely reverberate globally, affecting various economies, with emerging markets like India potentially seeing positive long-term impacts due to trade shifts and currency adjustments.
If Vice President Kamala Harris secures victory, her policies are expected to favor a gradual decline in inflation, aligning with the Federal Reserve’s 2 percent target. This would likely support the Fed's ongoing rate-cutting cycle in 2025, potentially stabilising market expectations.
Market analysts observe that both Trump and Biden presidencies saw rallies in U.S. and Indian equities. Under Trump’s first term, the S&P 500 and NASDAQ surged 70.2 percent and 142.9 percent, respectively, while they gained 50.8 percent and 36.8 percent under Biden. Back home, India’s Sensex and Nifty rose by 82.3 percent and 73.6 percent under Trump, and by 59 percent and 64.5 percent under Biden, reports said.
Should Harris win with a divided Congress, analysts predict minimal policy shifts, with markets likely refocusing on steady economic growth. However, a Democratic sweep might introduce corporate tax hikes and stringent regulations, which could weigh on US equities, especially in sectors like big tech and AI, as concerns about antitrust laws and regulatory oversight grow.
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