By Ajit Ranade
The election of Donald Trump for a second presidency is a turning point for the world. The outcome was decisive even as the reasons can be debated and inconclusive. Was it anti-incumbency which hurt Kamala Harris or was it the irresistible charm of Trump and his promises? Or was it due to third party hacking of the election by social media and big money? The latter is improbable, because the Harris campaign raised and spent more money than their rival. What is clear is that President Trump will fulfil some of his headline promises and create disruption in global geopolitics. The possible impact on global affairs and on India is briefly described below.
The first is on climate finance. As the 29 th Conference of Parties (COP 29) gets going in Baku, Azerbaijan, it is quite possible that the United States will renege on its pledge for contributing to climate finance. In 2015 at COP 21 the U.S. had signed the historic deal to strengthen its commitment and provide finance to developing countries. One of the first decisions of President Trump in 2016 was to walk out of the Paris agreement. Collectively since COP 15 i.e. from the 2009 Copenhagen conference, the developed countries had pledged to provide a 100 billion dollars every year toward climate finance assistance to developing countries. In the past fifteen years this pledge has been fulfilled only once fully. The U.S. has not met its financial pledge between 2017 and 2020. As such the U.S. had dragged its feet for a long time, but nevertheless has not abandoned being part of the negotiations. Under President Trump the commitment is bound to reduce and will weaken the collective resolve of developed countries to finance climate change mitigation and adoption of renewable energy. Since developed countries have been and continue to be major contributors to greenhouse gases, the discussion of finance and repair is one of “climate justice”. President Trump will deflect or deny the charge of climate injustice even as the U.S. reneges on its pledge. India stands to lose, since to get to net zero by 2070 the funding requirement is more than 10 trillion dollars. And much of this has to come from multilateral sources including America.The second big issue is immigration. It is worth noting that it was during his campaign that President Obama first coined a new term and verb, “my job got Bangalored”. He said, “Say no to Bangalore, say yes to Buffalo”. This notion that jobs are moving to outsourced locations has agitated Trump supporters. It is a misleading assertion, because every outsourced job creates more profit, and efficiency for the U.S. corporation, and that eventually leads to new job creation. But the person who loses his or her job points a finger at Bangalore. Under President Trump 2.0 the deportation of illegal immigrants may be done on a big scale. And there is likely to be some reform of the H1-B visa process, making it harder for Indian workers to locate to America to provide software and related services. As it is the H1-B new visas as well as renewals have become a lottery with only one third of the applicants succeeding. The rest will have to leave. Even though tech companies will resist any restriction on hiring foreign talent or on moving jobs offshore, President Trump will have enough political clout to push through. The mood of the labour force who are his supporters is to bring back the jobs onshore to Americans.
The third issue is on trade tariffs. Trump has already announced Robert Lighthizer as his trade chief. Lighthizer is known to be a hardliner and protectionist in his approach. We may find that the U.S. will impose high import duties on imports from not just China and Russia but also India, the European Union, Korea and Japan. Perhaps only Canada and Mexico and other free trade agreement partners might have tariff free access to the American consumer. This could result in a tit for tat trade war of escalating tariffs, some of which we saw in the first presidency of Trump. The anti-China sentiment is strong, and there is continuity in the hardline stance on China from the earlier Trump, then Biden and now Trump 2.0 administration. We will see the tech cold war play out much more, as the world gets divided into a Sinosphere and America dominated sphere, as far as tech is concerned. How is this to be reconciled with still strong US – China trade (currently 800 billion dollars), and the substantial presence of American companies in China (like Apple, Tesla, General Motors) remains to be seen.
The fourth issue is on America’s support for wars in the Middle East and Ukraine. Trump once described Ukraine President Zelenskyy as a super salesman, since every time he came to America he walked away with a 100 billion dollars of military and other aid. That could have been campaign rhetoric, but Trump’s next presidency might reduce support for Ukraine. Of course, arms aid and sale both to Ukraine and Israel has helped the fortunes and stock price of defence-related companies. But a relook is bound to happen. This also means that President Trump may push America towards isolationism i.e. decrease its role as global policeman. This is due to the perception of American people that they do not seem to benefit adequately with all that global spending on arms and security across the globe. American national debt is 35 trillion dollars, and high interest rates are making it difficult to sustain the burden. Hence the more inward-looking stance away from global involvement. This means more volatility, instability in various conflict zones, including the seas around Taiwan and China. Former Secretary of State Condoleezza Rice in an excellent recent piece, has warned against this tilt toward isolationism. She served under a Republican President Bush. But whether Trump will heed that warning remains to be seen.
The U.S. must brace for very high debt, continuing high interest rates, high inflation aggravated by Trump’s hike in import tariffs and a still not strong economy. India’s relationship will likely become more transactional with the United States in President Trump’s second term as he makes domestic issues a high priority.
(Dr. Ajit Ranade is a noted Pune-based economist) (Syndicate: The Billion Press) (email: [email protected])