India has the opportunity of increasing its exports in textiles, electronics, machinery and pharmaceuticals due to the US potentially imposing higher tariffs on products from China and Mexico.
US President-elect Donald Trump announced on Monday that he would sign an executive order on January 20, imposing 25% additional tariffs on all imports from Canada and Mexico, as well as an additional 10% tariff on imports from China.
Donald Trump reasoned the tariffs on Canada and Mexico as a means to curb migrant inflows and the tariffs on China as a means to stop drugs like Fentanyl coming to the US from there.
However, India did not appear in this first round of Donald Trump’s tariff measures, despite Trump calling India a tariff abuser. The US is India’s largest trading partner, with an annual trade worth over $190 billion.
“Exclusion from the tariffs may signal a strategic interest by the US to deepen trade ties with India,” the report quoted Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO) as saying. “This could pave the way for favourable trade agreements and collaborations.”
However, not all experts are too optimistic.
The report quoted Ajay Srivastava, founder of think tank Global Trade Research Initiative as saying that “Trump’s trade policies may be wider. This announcement is linked to the drug and immigration situation and other steps may come separately. India should be on a wait and watch mode.”
Similarly, Philippe Varin, the chair of the International Chamber of Commerce had said that India may only gain in the short run if the incoming Trump-led government levies relatively steeper duties on China and that any tariff war between Washington DC and Beijing could adversely impact global trade as a whole in the medium term.
Yet another risk is that retaliatory measures from China, such as changing domestic policies like reducing export tax waivers, can harm India’s solar industry, which relies on imports from China for 80% of its components.
Funnily, more than 97% of India’s solar panel exports goes to the US.
