Trump's midterm defeat raises hopes of tariff relief, but India still faces trade risks - experts explain

US President Donald Trump's political setback in the November 3 midterm elections has raised expectations of a possible moderation in Washington's aggressive tariff policies, potentially offering relief to trading partners such as India. However, economists caution that geopolitical considerations and existing trade powers could continue exposing Indian exporters to targeted restrictions.

Democrats have reportedly regained control of the US Senate, while making gains in the House of Representatives, amid voter frustration over high prices, trade disruptions and the war in Iran.

The results have intensified debate over whether declining political support for Trump's economic policies could influence ongoing India-US trade negotiations.

Will Trump's tariff strategy change?

Tanay Dalal, SVP – Business & Economic Research, Axis Bank, said the Republican Party's weaker-than-expected performance could have significant implications for the administration's future trade strategy.

"The weaker-than-expected Republican performance in the US midterm elections has renewed debate around the future trajectory of US trade policy and its implications for ongoing trade negotiations with India," Dalal said.

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However, he cautioned that changes in congressional control would not automatically weaken the administration's existing authority over trade measures.

"Any attempt to restore congressional authority over trade policy would require a veto-proof majority, which remains improbable, while judicial challenges to existing tariff measures continue to face significant uncertainty," he explained.

Have tariffs become a political liability?

According to Dalal, the election results may indicate weakening public support for tariff-intensive policies, particularly in regions facing higher costs from trade disruptions.

Several states, including Texas, Ohio, Michigan, North Carolina, Kansas and Maine, witnessed declining Republican vote shares, he noted.

Although tariffs have not significantly weakened overall US economic growth, their costs have been concentrated in particular industries and regions.

This has increased their political significance, potentially influencing voter behaviour and creating pressure on the administration to reconsider aggressive trade measures.

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Could lower tariffs ease inflation?

A divided government could gradually narrow the administration's room to pursue additional tariffs, particularly if concerns about household affordability continue influencing political debate.

Dalal suggested that moderating tariff policies could reduce supply-side disruptions and imported cost pressures.

Such developments could improve the inflation outlook and eventually create greater scope for monetary policy easing.

However, the impact would depend on actual policy decisions, rather than election results alone.

What does this mean for India?

For India, the changing political environment could create opportunities for smoother trade negotiations, but the risks remain significant.

Dalal warned that US trade policy would continue reflecting strategic and geopolitical considerations, including developments surrounding Ukraine and the West Asia.

Consequently, India could remain exposed to targeted trade measures even if Washington adopts a less aggressive overall tariff strategy.

"While the broader direction of travel may be towards reduced tariff activism, India could still remain vulnerable to targeted trade measures where strategic and geopolitical interests intersect," Dalal said.

The election setback may therefore increase pressure on Trump to moderate tariffs, but it does not guarantee immediate relief for Indian exporters or a breakthrough in bilateral trade negotiations.

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