With Trump’s historical support for stronger India-US ties, many anticipate new trade dynamics that could benefit Indian exporters, especially given Trump’s focus on reducing US dependence on Chinese imports. His proposed “Trump Tariffs” on Chinese goods could open doors for India in sectors like electronics, pharmaceuticals, and textiles, positioning Indian businesses as alternative suppliers to the US market.
However, Trump’s protectionist approach also poses challenges. Potential policies, such as universal tariffs on imports, stricter H-1B visa restrictions, and pressures for free data flows, could complicate India’s trade strategy. India’s current trade surplus with the US, valued at US$ 78 billion in FY 2024, underscores the significance of the US market for India. Maintaining and expanding this surplus will require careful navigation of Trump’s policies and strategic adjustments to secure India’s economic interests in a shifting global trade landscape.
The article explores how Donald Trump’s re-election as the 47th President of the United States could reshape India-US trade.
The election of Donald Trump as the 47th President of the United States has sparked significant debate about its potential impact on global trade, particularly for Indian businesses. Trump’s administration is anticipated to influence global geopolitics, international trade, and economic policy. His historically pro-India stance has been instrumental in strengthening diplomatic ties between the two countries.
There is a possibility of increased restrictions on Chinese exports and correspondingly enhanced opportunities for countries like India. At the same time, Trump has also taken steps in the past to address US trade deficit with India like increasing steel and aluminium tariffs, removing GSP benefits, calling out India for high tariffs on motorcycles, dairy, technology items and also pushing for a much more stringent IPR regime.
So, what might a “Trump 2.0” mean for India-US trade relations? Could we see a new wave of opportunities or intensified trade challenges? How might shifting US policies impact India’s market access and trade strategy? In this article, we delve into these questions and explore the potential scenarios for India-US trade under a renewed Trump administration.
According to the Ministry of Commerce & Industry, India exported merchandise valued at US$ 78 billion to the US in FY 2024, marking a 5-Year CAGR of 8.1%, making it the former’s largest export market. Additionally, India currently maintains a trade surplus, a position that will be crucial to safeguard as it navigates future trade scenarios. This surplus provides a buffer in global trade negotiations, especially as India adapts to evolving policies under the Trump administration.
The key aspects of Trump’s economic policies is the implementation of the “Trump Tariffs,” which are expected to affect the US’s trading dynamics, particularly with China. Trump’s administration has talked about imposing tariffs of up to 60% on Chinese imports, potentially damaging China’s competitiveness in the US market. In this context, India stands to benefit as a alternate supplier for some of the products where China has dominated in the past, such as electronics, textiles, pharmaceuticals, and more.
Key sectors of opportunity for India’s exports under Trump 2.0?
Source: ITC Trade Map ( Figures in US$ Billion)
The US imports huge volumes of merchandise from China, such as smartphones, mechanical appliances, toys, furniture, and plastics. India’s share in these sectors is currently low, but the imposition of high tariffs on China could make Indian exports more competitive. For instance, India’s share in the US smartphone market is only 3%, compared to China’s 27%. With Chinese products becoming less price-competitive, Indian businesses have a chance to gain market share.
Similarly, the pharmaceutical sector, where India already has a strong export presence, stands to benefit from ‘Trump tariffs’. India’s pharmaceutical exports to the US already account for a considerable share, and with China’s market share likely to shrink, India could see even more demand for its generics and other pharmaceutical products.
Another area where India could see an uptick in exports is the renewable energy sector. Trump’s proposal to cut green energy subsidies in the US may create a gap that Indian green energy exporters could fill, particularly with photovoltaic cells used in solar panels. Indian companies in this sector may find new opportunities for growth as they meet the US’s demand for more affordable green energy alternatives.
However, Trump’s proposed universal tariff of 10% on all imports to the US (as mentioned in his recent speeches) could trigger a global trade war, and India’s businesses may find themselves caught in the crossfire. Investment bank UBS has warned that such tariffs could lead to a 10% contraction in the stock market, which could affect investment flows globally. For India, navigating this scenario would require strategic negotiations with the US to ensure that its exports are not negatively impacted.
Dr. Ketan Vira, Director of Pillai HOC Institute of Management Studies and Research, suggests, “I believe the economic benefits India stands to gain from trade diversion away from China could well outweigh the costs of universal tariffs. This shift could open up meaningful growth opportunities for India, positioning it strongly in the global trade landscape.”
Prof. Arun Kumar, PhD and retired professor from JNU, cautions, “Trump’s trade policies will disrupt global trade, leading to higher prices, trade wars, and inflationary pressures. These disruptions will have widespread ripple effects, significantly impacting global economic growth.” Also, he feels that it will not be easy for India to capitalise on the opportunities being created, adding, “The existing trade networks are deeply entrenched, and transitioning to new arrangements will require time and significant adjustments, causing initial disruptions in the global market.”
Conversely, Indian businesses are optimistic about the favorable business environment in the US under Trump 2.0. For instance, the Aditya Birla Group has expressed intentions to increase its US investments, citing the historically favorable relationship between Trump and India.
Investments are also expected to flow into India. According to a report by The Economic Times, Apple Inc. could boost its iPhone production in India to over $30 billion annually within the next two years if US President Donald Trump follows through on his plan to impose heavy tariffs on Chinese imports. As Dr. Vira points out, “India has developed a strong, investment-friendly ecosystem, making it an appealing destination for global capital. The country’s growing market, skilled workforce, and regulatory improvements position it well to attract more investment, especially as businesses seek alternatives to China.”
Under a Trump 2.0 administration, India faces a trade landscape full of both risks and opportunities. As noted by the Global Trade Research Initiative (GTRI), potential challenges include increased restrictions on H-1B visas, which could disrupt India’s thriving IT sector. Additionally, pressure to adopt free data flow policies could challenge India’s current stance on data sovereignty, and US subsidies for domestic manufacturing could make American goods more competitive, potentially impacting India’s exports.
Despite these challenges, India’s economic position remains strong. As Anil Trigunayat, Adviser to the Centre of Geo -Economics for the Global South (COGGS), and a retired IFS officer, highlights, “India’s balance of payments is in its favor, supported by a diversified trade basket. While import tariffs in India remain high, the country is expected to adapt. India imports significant quantities of products like nuts, and the US, being a country with powerful lobbying groups, may push for selectively reducing tariffs in the future. Although there are headwinds, these challenges are expected to be short-term, and India will find ways to navigate through them.”
Moreover, India’s growing role in global trade is undeniable. “India’s large aircraft orders, generating jobs in the US, clearly demonstrate why the country can’t be ignored,” says Trigunayat. “As a growing economic powerhouse, India’s strategic importance demands attention and careful consideration in global trade and diplomacy. Furthermore, India’s market is too significant for the US to overlook.”
India’s trade surplus with the US highlights its growth potential, despite challenges like protectionist tariffs and visa restrictions. This presents an opportunity to strengthen domestic manufacturing through initiatives like “Atmanirbhar Bharat” and “Make in India,” giving an added incentive to work on innovation to enhance competitive advantage. As India’s trade ties with the US expand, there is a promising outlook for continued economic collaboration. With the right strategies, India is well-positioned to benefit from trade diversification and increased foreign investment, playing a key role in global trade.
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