Trump’s tariffs on China, Mexico, Canada double-edged sword for Indian exporters

US President Donald Trump’s tariffs on China, Mexico, and Canada could create opportunities for Indian exporters in sectors where they have capacity and a competitive edge, such as telecom, pharmaceuticals, chemicals, electrical machinery, apparel, and footwear.
But the fact that Trump has actually started acting on his campaign threats against trade partners doesn’t augur well for world trade as it could lead to trade diversion, disruption and more uncertainty, say exporters and trade experts.
“US importers will try to look for alternative suppliers to avoid higher costs of importing from the targeted countries. We have to identify such sectors where we have capacity and the extra penal tariffs can add to our own competitiveness and give us an edge,” said Ajay Sahai from Federation of Indian Export Organisations (FIEO).
Some such items include telecom and mobile phones, pharmaceuticals, chemicals, electrical machinery, apparel & fabric and foot wear, Sahai said quoting an internal analysis. Even in iron and steel, where the US gives a case-to-case exemption on the penal tariffs imposed by the earlier Trump regime on several countries including India & China, there could be gains, Sahai added.
In line with his campaign promise of penalising Mexico, Canada and China for alleged drug trafficking, Trump announced a levy of 25 per cent on Canadian and Mexican imports and an additional 10 per cent tax on Chinese goods on February 1 that would come into force on February 4.
Most of the opportunities for India come from China’s projected loss, while some items such as textiles & fabric and electric machinery could also benefit at the cost of Mexico, Sahai said.
Trade sceptical
However, the punitive tariffs have made exporters uneasy. “Indian exports to the US are also at risk if Trump chooses to impose reciprocal tariffs on India. That is worrying,” said a Noida-based exporter of textiles.
“There will be huge trade diversion happening. And it is not a good sign as it will add to the already high uncertainty. Global trade and global economy may slow down because of such tariff war,” Sahai said.
India needs to focus more on protecting itself from future tariffs by opening a dialogue with Trump rather than look for opportunities, said Biswajit Dhar, Distinguished Professor, Council for Social Development.
“US is not getting after all these countries just to have fun. He has said that he wants to `make America great again’ by punishing imports from countries that have a surplus. His ultimate objective is to get industries relocated to his country. It is not to benefit this country or that country,” said Dhar.
The US is India’s top export destination with exports to the country valued at $77.5 billion in FY24 and a trade surplus of about $35 billion.