Whatever one may say about Donald Trump, the US president, there is no denying the fact that his politics, though random and chaotic, is theoretically calculated. Even as a US delegation wings its way to India to discuss the bilateral trade deal, which is in the making for months, Trump fires a sensitive verbal missive against India. At a meeting at the White House, he asked why India could ship large volumes of rice to the US, and those too at low prices. He wanted additional duties on rice exports, since they symptomised “dumping.” He ranted that India “cannot do that… should not be dumping.” One is not sure if it signals new tariffs, whether the statements were aimed to assuage the miffed feelings among the American farmers who complain about falling domestic prices due to imports, or whether it was a means to verbally arm twist New Delhi into granting more access, and concessions for select farm imports from America.
For a long time, India has opposed the entry of farm goods at lower duties. In fact, the prime minister, and other ministers, have repeatedly maintained that the interests of the local farmers will not be compromised, or placed at the altar of trade and tariffs. However, farm imports remain the most contentious, and possibly the last few details to be ironed out before finalising a bilateral deal. By introducing rice as another factor, and raising the fears of new duties on Indian exports, Trump hopes to influence the Indian negotiators to give in a bit more. Couple this with the fact that America recently announced a $12 billion support package for the local farmers to “shield domestic agriculture from perceived foreign competition.” In addition, the US eased the duties on several food items like spices and tea, which are shipped from India. These did not include rice.
Stock markets react much like Trump, and are swayed by short-term, and immediate events, and non-events. The reactions in the bourses are as random, and knee-jerk, as Trump. Bu, like the case of the US president, there is a method to the madness of sock movements. For example, in the rice-Trump incident, shares of rice exporters such as Kohinoor Foods, LT Foods, Chaman Lal Setia Exports, and KRBL tumbled on the Indian exchanges. It did not matter to the investors that the US comprises a small share of the country’s rice exports. Higher tariffs by America will not make a material difference to the firms’ revenues, and profits. Since theoretically, it was a negative event, despite being a non-event, the practical impact was negative. Kohinoor Foods, for example, plunged nearly 10 per cent to an intraday, and a 52-week low of just over Rs 24.
Such drastic stock movements are visible in other cases. Let us take the example of H-1B visas, which has proved to be a controversial topic for several months, including during Trump’s first term. Under the republican regimes, there are consistent efforts to change the visa regime to enable the hiring of more American employees in IT, and discourage the entry of low-cost, less-experienced Indians and Chinese. This year, Indian IT stocks were constantly hurt by the H-1B-related announcements, decisions, actions. A bill introduced by a senator, which had minimal chances of passing through triggered stock sales. Even when the decisions were permanent, the reactions had little links to the ground realities. Investors did not think through the ramifications, and consequences. They just sold, with the IT sector being one of the star underperformers among Indian equities this year. Experts have talked about the re-rating of IT stocks, but been optimistic over their valuations in 2026.
Consider the $1,00,000 fee on H-1B visas. This will clearly reduce the outflow of Indian manpower to the US. Or, at least it will force the Indian IT firms to spend more to send people. If one considers that the US gives 65,000 such visas every year, and India accounts for 70 per cent of them, the annual visa bill amounts to more than $4,500,000,000, or a massive $4.5 billion. Of course, it is a huge hit. However, investors failed to reckon several possible scenarios, which are being, and will be, translated into reality. The first is that Indian IT firms will reduce the dependence on H-1Bs. This is happening, and data shows that Indians’ share has reduced in the recent past. Second, Indian IT firms, and recruiters, may push the visa on the applicants. If you are interested to go to America, please pay the visa fees from your pockets, and do not depend on the firm.
Finally, the visa fee may hurt the American firms more than the Indian ones. A large part of H-1Bs is cornered by Indian students, who study in America, and automatically are absorbed by the American firms via H-1Bs. No firm will pay $1,00,000 for a fresh recruit, and a rookie employee. The students, who have spent massive amounts on education, may not wish to cough out such large amounts to get the visa. Thus, the absorption of Indians in American firms is likely to reduce. This will service Trump’s objective that more American are hired at the low and middle levels. But it will hurt the interests of the American firms.
