By Vineet Kumar 
Will Donald Trump’s Tariff War Reach India? Here’s What You Need to Know
As the US braces for the possibility of another term under Donald Trump, the global trade community is abuzz with speculation about the return of protectionist policies. While the opening shots of Trump’s tariff war previously spared India, his rhetoric and past actions leave little room for complacency.
What do Trump tariffs mean for India’s economy? Here’s a detailed analysis.
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Trump’s Trade War: A Global Concern
In his first term, Donald Trump made waves with steep tariffs targeting major US trading partners, including Canada, Mexico, and China. India, though not in the direct line of fire, did not entirely escape scrutiny.
Trump has consistently referred to India as a “tariff king” and a “trade abuser,” criticizing its high import duties on American goods. For instance, Indian steel and aluminium faced additional US tariffs under his administration, prompting New Delhi to retaliate with higher duties on American almonds, apples, and other products.
India imposes an average tariff of 9.5% on US goods, according to WTO data from 2022. While this is lower than the global average, it remains a sticking point in Indo-US trade relations.
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India-US Economic Ties: A Snapshot
Despite occasional tensions, the US remains India’s largest export market, making their economic ties critical.
Merchandise Trade: Total bilateral trade between India and the US reached $119 billion in 2023-24, with India enjoying a trade surplus of $35 billion.
Services Trade: India’s services exports to the US amounted to $36.3 billion in 2023, showcasing the depth of their trade relationship.
For India, the US is one of the few major economies with which it maintains a trade surplus, making these ties vital for its export-driven growth.
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Potential Impact of Trump Tariffs on India
Should Trump intensify his tariff war in a second term, India could face serious challenges, particularly in key export sectors like steel, textiles, and electronics.
According to a Morgan Stanley analysis:
A 10% tariff hike could reduce India’s GDP growth by 30 basis points.
Sectors reliant on US exports might face supply chain disruptions and higher consumer costs.
However, India’s resilient economic fundamentals—such as a robust service economy, a growing manufacturing base, and a favourable demographic profile—could mitigate some of these impacts.
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Sectors at Risk
1. Steel: Additional US tariffs could reduce Indian steel exports, impacting profitability and jobs in the sector.
2. Textiles: As a major textile exporter to the US, India may face competitive pressure if tariffs rise.
3. Electronics: The electronics sector, heavily reliant on the US market, could see significant disruptions.
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Navigating the Tariff Storm
India’s strategic partnership with the US, particularly in defence and technology, offers opportunities to manage potential trade tensions.
Indo-Pacific Strategy: India’s growing role in countering China’s influence strengthens its strategic importance to the US.
Defence and Technology: Both countries are increasingly cooperating in critical areas like advanced defence technologies and semiconductors.
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Challenges to ‘Make in India’
India’s ambitious “Make in India” initiative, which seeks to attract global manufacturing investments, might face hurdles under a protectionist US administration. While high-profile collaborations may survive, smaller technology transfers and investment flows could decline.
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The Road Ahead
For India, navigating a potential Trump tariff storm will require:
Strengthening its position as an investment hub.
Diversifying export markets to reduce reliance on the US.
Adjusting trade policies to balance short-term challenges with long-term growth.
The evolving Indo-US economic relationship will hinge on dialogue, collaboration, and leveraging India’s strategic importance in the global arena. With careful planning and proactive engagement, India can weather the challenges of a more protectionist US policy.
For more insights into India’s economy and global trade, stay tuned to TradingThought.
