India stands to face significant challenges and opportunities as US President Donald Trump’s tariff threats loom over the BRICS nations, including India. While India was notably excluded from the latest wave of tariffs targeting Mexico, Canada, and China, the broader trend of the US’ protectionist measures could still affect India’s trade dynamics.
Challenges and opportunities for India
India faces both risks and opportunities: it could potentially deepen its trade ties with the US, particularly in defence and energy, or face disruptions from higher tariffs if tensions escalate. How India navigates this complex landscape will determine its economic standing.
Trump’s recent threat to impose 100 per cent tariffs on BRICS nations, including India, should they undermine the US dollar, adds a layer of uncertainty. He warned that any attempt by BRICS nations to create a rival currency would lead to such tariffs. This aggressive stance on currency challenges reflects Trump’s broader trade strategy, which focuses on curbing trade imbalances and asserting the dominance of the US dollar. India, with its rising economic influence, stands at the intersection of these geopolitical and economic pressures.
India excluded from recent tariffs, but protectionism looms
The latest tariff announcements targeting Mexico, Canada and China reflect Trump’s continued focus on addressing the US trade deficit. While India has been excluded from this wave of tariffs, experts caution that India could still face repercussions if the US’ protectionist trend continues.
India’s trade with the US
India’s merchandise exports to the US account for over 18 per cent of total exports. In 2023-24, India exported goods worth $77.5 billion to the US, more than the total exports to its next three largest markets combined. However, India’s imports from the US are smaller, representing just over 6 per cent of US imports, leading to a rising trade deficit for the US.
Composition of India-US trade: Key imports and exports
India’s imports from the US include petroleum crude, pearls, precious stones, electrical machinery, aircraft parts, and military equipment. Exports to the US primarily consist of petroleum products, pharmaceuticals, telecom instruments, and electronic components. The trade in defence equipment is also growing as India diversifies away from Russia.
Potential impact of Trump’s tariff threats on Indian industries
President Trump’s proposed tariffs could severely impact Indian industries like IT and pharmaceuticals, which are heavily reliant on US markets. A rise in tariffs could lock Indian goods out of critical markets, especially automobiles and pharmaceuticals. In response to previous US tariffs, India has imposed counter-tariffs, suggesting a similar response if new duties are implemented.
Trump’s demands from India
Trump has urged India to increase purchases, particularly security equipment. He has emphasised the need for a fairer trade relationship. India’s response could include tariff adjustments if a Free Trade Agreement (FTA) is pursued, though no tariff cuts are currently planned under the Indo-Pacific Economic Framework (IPEF).
Can India balance trade with more purchases?
India may increase its purchases of US goods, especially defence equipment, as it diversifies away from Russia. However, this is dependent on the commercial terms offered by US companies, particularly in the energy sector. The price competitiveness of American petroleum products will be crucial in balancing trade.
(With inputs from Hindustan Times)
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