Trump 2.0: Government in wait and watch mode, strategies in place for different scenarios

As Donald Trump is sworn in as the new President of the United States, India is closely monitoring the impact of his policies on the domestic economy. A number of inter-ministerial talks have already taken place, and the ministries are working on various strategies to offset any impact of his announcements. But the sources indicated that the government is still in a wait and watch mode.

Trump’s tariff policies remain a key monitorable instrument for India, and the Union Budget 2025-26 looks to rationalize and reduce tariffs on various items as part of the planned review, but this is also expected to send a positive signal to the US on India. Tariff position.

On the first day, Trump signed an executive action to investigate the causes of the US trade deficit with foreign countries, which will likely include the issue of tariffs. He also announced that he would impose a 25% tariff on imports from Canada and Mexico starting February 1, but did not outline any further action plans on tariffs at this time.

“President Trump’s 2025 Executive Orders issued on Day One hold challenges and opportunities for India. While they may create strategic and economic disruptions, they also provide India with an opportunity to reevaluate its energy policies, strengthen public health infrastructure, and reduce dependencies in Vital sectors in a report, adding that the numerous executive orders issued on the first day are just the beginning and said: “We must be prepared for surprises on tariffs and trade soon.”

Concerns about a global tariff war are also growing with expectations that Trump will increase tariffs on imports across the board.

Macquarie global strategists Victor Shvets and Kyle Liu said in a report that they expect that under Trump 2.0, average US tariffs are likely to double from about 5% to about 10%. “We also continue to believe that blanket punitive tariffs are unlikely, even as a negotiation tactic,” they said.

Nomura analysts believe China will likely face the largest tariff increases among US trading partners, including many consumer goods that were not targeted in Trump’s first term.

“We expect Trump to largely follow through on his campaign promise, but the proposals, especially regarding tariffs on Canada and Mexico, are likely to be eased in our view. We expect Chinese tariffs to be raised by 35 percentage points cumulatively. In addition However, Trump is likely to impose additional 10% tariffs on several other countries in Europe and Asia and 5% tariffs on Mexico and as a result, we expect the rate to rise The actual tariff on US imports is about 10%.

Trump’s other executive orders, including plans to end automatic citizenship for children born in the United States to non-citizen parents, could have a direct impact on India but could see a legal challenge.

“President Donald Trump’s proposal to end automatic citizenship for children born in the US to non-citizen parents has raised significant concerns among Indian families. This policy will directly impact thousands of children born to Indian parents who hold US green cards or work as Indian diplomatic personnel,” the GTRI memo said. Which may change their residency and citizenship paths in the long term.

At the same time, the impact of Trump’s policies on inflation as well as the rupee should also be monitored. There are concerns that his policies could fuel US inflation causing the Fed to raise interest rates. This could have repercussions on the global economy.