Trump’s midterm setback could soften US tariff threats, give India more room in trade talks: Report

US President Donald Trump’s political setback in the midterm elections could reduce the risk of sudden tariff escalations and give India greater room in trade negotiations with Washington, according to a report by Emkay Research.

The report said Democrats gaining control of both chambers of Congress could constrain the administration’s ability to introduce fresh trade measures, although the broader US tariff framework is unlikely to undergo a major change.

The shift could mean fewer sudden tariff shocks for trading partners, with future measures increasingly requiring investigations under Section 301 and Section 232.

Why India could get more negotiating room

For India, the urgency of concluding a trade deal with the US may have eased, the report said.

It noted that the proposed 18 per cent framework tariff rate was never implemented, while Indian goods now face a lower 10 per cent Section 301 duty. The US has also lost its leverage under the International Emergency Economic Powers Act (IEEPA), according to Emkay Research.

The report said Trump’s weakened political position could increase pressure on his administration to focus on consumer affordability and pursue trade agreements before the 2028 elections.

Sector-specific tariff risks remain

Despite the potentially softer approach, trade-related uncertainty has not disappeared.

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Sector-specific tariffs under Section 232, particularly on pharmaceuticals and electronics, remain a concern for Indian exporters.

The report also warned that setbacks in diplomatic efforts involving Russia or Iran could revive US pressure on India over its oil imports.

“Trade remains one of the few areas he controls alone, however, so headline volatility will persist even as the bias softens,” the report said.

Could the rupee and exports benefit?

Softer crude oil prices, a weaker US dollar and lower tariff volatility could support the Indian rupee and improve the country’s export outlook, Emkay Research said.

These factors could gradually reduce India’s risk premium. However, the benefits may remain limited by current account funding requirements and broader global financial uncertainties.

The report cautioned that while Trump’s midterm setback could create a more favourable environment for India, it does not eliminate the possibility of fresh trade-related pressure from Washington.