US President Donald Trump signs documents.
Credit: Reuters Photo
New Delhi: The Donald Trump-led US government may negotiate favourable tax treatment for American businesses operating in India that would impact revenue of the Centre, SBI Research said on Tuesday, a day after the new administration took charge in the world's largest economy.
On tariffs, SBI Research said India would be impacted in a limited manner. "For India, past experience suggest that India has broadened its export market and exports towards value added products and thus even if tariffs are imposed in a limited manner India might be impacted but not significantly in long run," Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India, said in a note.
Trump signed a flurry of executive orders on the first day after assuming charge as the US president on January 20. He has indicated that the US administration would seek favourable deals for American businesses in other countries impose high tariffs to reduce imports.
Elon Musk-led Tesla has been pitching for tariff concessions to enter the Indian markets. Musk was the biggest donor in the 2024 American election, spending over $277 million to help Trump win the US presidency. Musk now may pitch for concessions to his businesses in India and other parts of the world through the Trump administration.
Trump’s action to suspend aids to foreign countries and negotiate favourable contracts for the American oil companies would also have impact on the Indian economy.
“US may negotiate for fresh oil purchase contracts from US oil companies to support it local production. These purchases may have to be weighed carefully by India to avoid any disruptions and inflation management,” SBI Research said.
Discounted crude oil purchases from Russia helped India in containing inflation and keeping energy prices under control even though it soared globally.
“The impact of suspension of aid should be marginal,” it added. One of the orders signed by Trump on the first day of his second term of the presidency is suspension of US foreign assistance for 90 days pending reviews.
The other orders include imposition of 25% tariffs on Canada and Mexico starting February 1. Plans for additional tariffs on Chinese imports have been left unspecified. Trump has also announced plans to impose high tariffs on imports from India.
During a press meet at the Oval Office in Washington after assuming charge as the 47th president of the United States, Trump threatened that the US would impose 100% tariffs on BRICS countries if they continue their de-dollarisation efforts.
BRICS members include India, Russia, China, Brazil, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates (UAE).
On currency fluctuations, SBI Research said, “We expect USD to appreciate only if fiscal consolidation, CAD (current account deficit) reduction and inflation control happen together which could prove to a tough proposition.”
We expect climate finance from US origin investors to slowdown thus impacting transition in emerging market and developing economies (EMDE) such as India, it said.