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Donald Trump’s significant tariffs have disrupted global trade, but such disruption can often lead to new opportunities.
Beginning on April 9, Indian products will incur tariffs as high as 27% (while Trump’s tariff chart lists the rate at 26%, the official order indicates 27%—a discrepancy noted for other countries as well). Before this increase, average US tariffs across trading partners were around 3.3%, some of the lowest worldwide, compared to India’s 17%, according to the White House.
With the US now imposing even steeper tariffs on China (54%), Vietnam (46%), Thailand (36%), and Bangladesh (37%), India presents a favorable opening in textiles, electronics, and machinery, as identified by the Delhi-based think tank Global Trade Research Initiative (GTRI).
Increasing tariff barriers on Chinese and Bangladeshi goods allows Indian textile manufacturers to grow in the US market. While Taiwan excels in semiconductors, India has the potential to focus on packaging, testing, and lower-end chip manufacturing, provided it enhances infrastructure and policy support. Even a partial supply chain shift from Taiwan could benefit India, given the 32% tariffs.
Sectors like machinery, automobiles, and toys—currently dominated by China and Thailand—are well-suited for relocation driven by tariffs. According to GTRI, India can take advantage of this by attracting investments, scaling production, and increasing exports to the US.
But can India truly capitalize on this moment?
Rising tariffs have escalated costs for businesses relying on global supply chains, hindering India’s competitiveness in global markets. Despite a boost in exports, largely from services, India still faces a significant trade deficit. With a share of only 1.5% in global exports, Trump has labelled India as a “tariff king” and called it a “big abuser” regarding trade relations. The introduction of these new tariffs only raises concerns about the competitiveness of Indian products.
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“In general, the US’s protective tariff regime could catalyze India’s gains from global supply chain reorganizations,” asserts Ajay Srivastava of GTRI.
“To fully take advantage of these opportunities, India needs to improve its business environment, invest in logistics and infrastructure, and ensure policy consistency. If these conditions are met, India could become a significant global manufacturing and export hub in the upcoming years.”
However, this is considerably easier said than done. Biswajit Dhar, a trade expert from the Council for Social Development in Delhi, highlights that nations like Malaysia and Indonesia may be better poised than India.
“Though we may recover some lost ground in the garment sector as Bangladesh faces higher tariffs, the stark reality is we’ve treated garments as an industry in decline and have not invested adequately. Without enhancing capacity, how can we potentially benefit from these tariff shifts?” Mr. Dhar remarks.
Since February, India has intensified efforts to win Trump’s favor—committing to $25 billion in US energy imports, courting the US as a major defense supplier, and exploring deals for F-35 fighter jets. To mitigate trade tensions, India has eliminated a 6% digital advertisement tax, reduced bourbon whiskey tariffs from 150% to 100%, and cut duties on luxury cars and solar panels. Meanwhile, Elon Musk’s Starlink draws closer to final approval. Extensive trade negotiations have commenced to address the US’s $45 billion trade deficit with India.
Nevertheless, India has not evaded the tariff conflict.
“India should be worried—there was hope that ongoing trade discussions would protect it from reciprocal tariffs. Encountering these tariffs now poses a serious challenge,” warns Abhijit Das, former leader of the Centre for WTO Studies at the Indian Institute of Foreign Trade.
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One silver lining: pharmaceuticals are exempt from reciprocal tariffs, providing relief for India’s generic drug producers. India accounts for approximately half of all generic medications supplied in the US, where these cost-effective options constitute 90% of prescriptions.
Conversely, exports in crucial sectors like electronics, engineering goods—such as automobile parts and industrial machinery—and marine products could face difficulties. This is particularly alarming for electronics, given the considerable investments made through India’s “production-linked incentives” (PLI) schemes aimed at enhancing local manufacturing.
“I have concerns regarding our exporters’ capabilities—many are small manufacturers who may find it hard to manage a 27% tariff increase, rendering them uncompetitive. Escalating logistical expenses, surging business costs, and deteriorating trade infrastructure only increase the difficulty. We are starting from a significant disadvantage,” states Mr. Dhar.
Many view these tariffs as a tactic from Trump in trade negotiations with India. The latest report from the US Trade Representative highlights Washington’s discontent with India’s trade regulations.
Released recently, the report points to India’s stringent import regulations on dairy, pork, and fish, necessitating non-GMO certification without scientific justification. It also criticizes India’s slow approval processes for genetically modified products and price restrictions on medical stents and implants.
Concerns over intellectual property have placed India on the ‘Priority Watch List’, noting weak patent protections and an absence of trade secret laws. The report also expresses apprehensions about mandates for data localization and restrictive satellite policies, further straining trade relations. Washington worries that India’s regulatory stance is increasingly akin to China’s. Removal of these barriers might enable US exports to grow by at least $5.3 billion annually, as per the White House.
“The timing couldn’t be worse—being in the midst of trade discussions exacerbates our disadvantage. This issue goes beyond market access; it’s about the entire package,” Mr. Dhar concludes. Also, gaining an advantage over Vietnam or China isn’t an overnight task—building opportunities and competitive strength necessitates time.
