With Donald Trump preparing to return as President of the United States, Indian exporters may face new challenges in the form of higher tariffs and more stringent trade policies. Trump’s “America First” agenda, which is rooted in protectionism, could increase customs duties on key Indian exports such as textiles, pharmaceuticals and automobiles. The change could impact India’s revenues and market share in the US, while the tech industry, particularly dependent on H-1B visas, is particularly sensitive to changes in immigration policy.
Potential regional impact
Trump’s trade policies are expected to have a direct impact on some IMost important regions of India:
- Textiles and Apparel
- The US may impose higher tariffs on textile exports from India, which could reduce demand and lead to tough competition with domestic and international producers in the US market.
- medicines
- Indian pharmaceutical products, which are essential exports to the US, may face increased tariffs, making them less competitive and affecting India’s stranglehold in the US generic drugs market.
- automobile
- If America increases customs duty on vehicle imports, the automobile sector may suffer huge losses. This may reduce the appeal of Indian made automobiles in the US market, which will have a direct impact on manufacturers and exporters.
- Information Technology (IT)
- The IT sector is particularly vulnerable, as more than 80% of India’s IT export earnings come from the US. Tightening H-1B visa rules could increase operating costs, slow growth and complicate recruitment for skilled workers, which would have a direct impact on Indian IT giants. Heavy on this visa.
- Chemicals and Engineering Products
- With possible tariffs on chemicals and engineering products, India may see a decline in its competitive advantage in these sectors, which will impact revenues.
- electronics
- Trump’s protectionist stance could impact electronics exports from India, especially if there are changes to the Indo-Pacific Economic Framework (IPEF), a trade agreement involving several countries.
- food and agriculture
- High existing US tariffs on agricultural products such as dairy (188%), fruits and vegetables (132%), and grains (193%) may hinder the ability of Indian farmers and producers to effectively export to the US.
The big picture: trade and investment
Trump has earlier also called India a “big tariff abuser” and has termed the country as a “tariff king”. Under his administration, Indian exporters may face reciprocating tariffs, especially on products such as textiles, automobiles and pharmaceuticals. Bilateral trade in goods between the US and India was estimated at US$120 billion in 2023-24, down from US$129.4 billion last year. India’s merchandise exports to the US are expected to grow by 46% from US$53.1 billion in 2020 to US$77.5 billion in 2024, highlighting the importance of this trade relationship.
opportunities amidst challenges
While Trump’s stance may pose challenges, his tough stance towards China may present opportunities for Indian businesses. Sectors such as electronics and pharmaceuticals could benefit as the US looks for alternative suppliers outside China. Additionally, India’s growing demand for advanced technology and capital goods opens up avenues for increased bilateral trade with the US.
As Trump’s “America First” agenda could usher in a new era of protectionism, India must be prepared for trade negotiations that balance these new realities. By diversifying markets, adapting to policy changes, and aligning with US geopolitical goals where possible, Indian exporters can mitigate potential risks while taking advantage of emerging opportunities.
