Trump's Presidency Can Benefit India As Investments And Trade Set To Be Diverted Away From China: Moody's Ratings

With Donald Trump set to assume the US presidency following a closely contested election, India and other Asian nations could stand to benefit amid escalating US-China tensions and potential restrictions on investments in critical sectors, according to Moody's Ratings.

The global rating agency expects trade and investment flows to be further diverted away from China as the US tightens investments in strategic sectors in the Asia-Pacific region, Economic Times reported.

This would negatively affect China's economy and consequently dampen regional growth. However, this shift might benefit India and ASEAN countries. The agency emphasised that Trump would have both legislative and executive options to advance his agenda.

Moody's expects the Trump administration to bring significant changes across fiscal, trade, climate, and immigration policies, diverging from the current approach under President Joe Biden.

As a candidate, Trump proposed tax reforms, aiming to make the 2017 Tax Cuts and Jobs Act permanent, lower corporate tax rates, and provide income tax relief. These plans, coupled with targeted tariffs, including potentially high tariffs on Chinese goods, are likely to increase federal deficits.

Moody’s highlighted that the US under Trump may adopt a protectionist trade policy that could disrupt global supply chains and raise risks for sectors relying on imports, such as manufacturing, technology, and retail.

"Protectionist measures could disrupt global supply chains and negatively affect sectors that rely on imported materials and goods," it added. The agency also pointed out that Trump's trade policies would most immediately impact manufacturing, although a divided Congress could influence the extent of these policies.

On climate, the US is expected to see reversals as Trump supports fossil fuel expansion under "American energy dominance." Reduced funding for green projects and a possible exit from the Paris Agreement could undercut the U.S.’s emissions goals.

While federal backing for clean energy may decline, private and state-level initiatives are anticipated to partially offset this shift. "The shift would likely result in renewed support for the fossil fuel industry,"Moody's added.

There can be reduced funding for clean energy and green technologies and loosened environmental regulations. It’s anticipated the Trump administration could withdraw from the Paris Agreement again, reversing net-zero emissions targets.

On regulatory matters, Trump is anticipated to favor a lighter regulatory approach, potentially reducing requirements for smaller banks but increasing creditor risks, Moody’s noted.