India’s response to HIRE Act must be pragmatic and long-term

If US President Donald Trump’s 50 per cent tariffs on merchandise exports from India have a debilitating effect on our economy, the Halting International Relocation of Employment (HIRE) Act will worsen the damage as it will impact India’s services exports to the US. For services, India enjoyed a trade surplus of $3.2 billion in the last fiscal, exporting an estimated $28.7 billion and importing $25.5 billion. Republican Senator from Ohio Bernie Moreno introduced the HIRE Act on September 5. It proposes a 25 per cent tax on outsourcing payments—that is, on any payment made by a US company or taxpayer to a foreign person whose work benefits consumers in the United States.

“While college grads in America struggle to find work, globalist politicians and C-Suite executives have spent decades shipping good-paying jobs overseas in pursuit of slave wages and immense profits; those days are over,” he observed. Three points need to be made here. First, protectionism in the US is not something that functions as per the whims and fancies of Trump; it is deep-rooted and widespread. It is closely linked to the MAGA (Make America Great Again) movement; there are no signs of the movement weakening; on the contrary, the movement is growing in strength.

Second, the ruling Republicans are MAGA flag bearers. Traditionally regarded as the party of capitalists and the rich, it is championing the cause of the man in the street. As Moreno said, “It’s time to fight for working-class Americans and ensure that they can work and retire with dignity. If companies want to hire foreign workers instead of Americans, my bill will hit them where it hurts: their pockets.” Meanwhile, Democrats, who are seen as defenders of the rights of the common people, are unlikely to oppose the measures intended to help the working class. So, a decline in protectionism in the US is highly unlikely in the foreseeable future.

Finally, Delhi should double down its efforts to iron out the differences with Washington. Trump’s recent utterances hint at his desire to have better Indo-US ties; he said that India and the US have a “special relationship” and “there is nothing to worry about.” Prime Minister Narendra Modi has also “deeply” appreciated and “fully” reciprocated Trump’s sentiments and positive assessment of bilateral ties.” This mutual goodwill offers a crucial opening. The challenge for policymakers on both sides is to ensure that the broader strategic partnership—covering defence cooperation, geopolitical alignment in the Indo-Pacific, and technological collaboration—is not derailed by trade frictions.

It is in the shared interest of both nations to build on the thaw. They must prevent economic disagreements from spilling over into the political or strategic domain, and vice versa. India should pursue a two-pronged approach. First, it must press for greater clarity and possible exemptions in the implementation of the HIRE Act, should it become law, to shield at least some categories of service exports from punitive taxation.

Second, it must diversify its trade and services markets to reduce over-dependence on the US. While the US remains India’s single largest trading partner, an over-reliance on one market makes the economy vulnerable to sudden policy shifts. Expanding partnerships with Europe, East Asia, and emerging markets could provide a measure of insulation. In short, our response should be pragmatic and long-term.