Tariffs in Trump 2.0: Trade diversion may benefit India with export growth
Virendra Pandit
New Delhi: With US President-elect Donald Trump pledging to impose high tariffs on three of its key trading partners, including China, India is expected to get huge export opportunities, something its domestic industry should prepare to tap into, National Institution for Transforming India (NITI) Ayog CEO BVR Subrahmanyam said on Wednesday.
Last week, Trump, who is set to inaugurate his second, non-consecutive term as the 47th US President on January 20, 2025, vowed to introduce 25 percent tariffs (or customs duty) on imports from Mexico and Canada and an additional 10 percent on China.
“Whatever Trump has announced so far…I think there are opportunities for India. We are a man at first slip, the ball is coming in our direction. Are we going to hold it or drop the catch, it’s for us to see…and I think, you will see some steps in the next few months,” the media reported Subrahmanyam as saying.
He foresaw huge disruptions in the US trade because of this policy which, he said, would unfold fresh opportunities for India.
“The question is if we actually prepare ourselves, it can lead to a massive boom… because there is going to be trade diversion,” he added.
The US is India’s largest trading partner. In FY24, India’s exports to the US stood at USD 77.51 billion, and imports at USD 42.2 billion. The US also accounts for 70 percent of India’s IT export revenue.
“Our relationship with the US is multi-dimensional. It is very deep. It’s not standing only on one leg which is trade, and there are many many other dimensions. The two nations have a much deeper relationship and all these things will be taken into account,” Subrahmanyam said.
Ironically, Trump, a businessman-turned-politician, during his election campaign, called India an “abuser” of import tariffs. Earlier, in October 2020, he labeled India as the “Tariff King.”
But things have changed since and China, viewed as the one responsible for the COVID-19 pandemic, has emerged as the top rival of the US unlike in the past when it was seen as the top partner.
Trump has also warned the BRICS bloc members against de-dollarization—replacing the US dollar with a new currency—and sought a commitment to that effect from the nine-member group, which includes India, Russia, China, and Brazil, among others.
Subrahmanyam said trade needs to be promoted actively to make India a developed nation.
Suman Bery, Vice Chairperson of NITI Aayog, said one should not be “obsessed with” trade deficits as an economy gains more from imports.
“Because we have a floating exchange rate, we structurally will have a trade deficit and because we want to invest, we will structurally have a current account of deficit….these steps are good, not bad.”
“We have to walk a very careful line about not closing of imports to the point where we are cultivating local monopolies.”
