The spectre of heightened trade barriers under a potential new US administration is casting a long shadow over India's export sector. Industry experts and analysts are raising alarms that proposed tariff increases by former President Donald Trump, if re-elected, could jeopardize Indian shipments worth a staggering $3 billion annually. This development poses a significant challenge for India's trade ambitions at a time when global economic currents remain unpredictable.
The Looming Threat of Escalated US Tariffs
Discussions in US political circles, particularly from the Trump campaign, suggest a drastic shift in trade policy. Proposals include imposing a universal baseline tariff of at least 10% on all imports, with significantly higher rates—potentially 60% or more—targeted specifically at Chinese goods. While aimed primarily at China, the blanket nature of the proposed baseline tariff means Indian exports would not be immune. This policy shift is being framed as a strategy to protect American manufacturing and jobs, but it carries global repercussions.
According to a detailed analysis by the think tank Global Trade Research Initiative (GTRI), the immediate brunt would be borne by key Indian export sectors. Chemicals, textiles, auto parts, and consumer electronics are among the most vulnerable categories. The GTRI report, co-authored by founder Ajay Srivastava, underscores that these sectors have thrived under the current tariff regime but lack the deep competitive advantage or trade agreement protections to easily absorb a sudden 10% cost increase. This would make Indian goods less attractive in the crucial US market, potentially leading to a contraction in orders and market share loss to competitors in nations with free trade agreements (FTAs) with the US.
Vulnerable Sectors and the China Factor
The potential US tariff strategy operates on a dual track. The first is the across-the-board hike affecting all trading partners, including India. The second, and more aggressive, track involves super-high tariffs on Chinese imports. This creates a complex scenario for India. On one hand, some Indian products might benefit if US buyers seek alternatives to expensive Chinese goods. On the other hand, the blanket tariff would still apply to Indian exports, dulling that potential advantage.
India's merchandise exports to the United States stood at approximately $78.5 billion in the 2023-24 fiscal year, making it the largest single-country destination. A 10% tariff on even a portion of this trade represents a substantial economic threat. Experts point out that India's lack of a comprehensive free trade agreement with the US leaves its exporters particularly exposed. In contrast, countries like Mexico and Canada, which are part of the USMCA trade pact, would be shielded from such unilateral increases, putting Indian exporters at a relative disadvantage.
Strategic Responses and the Path Forward
Faced with this gathering storm, Indian industry bodies and trade experts are advocating for a multi-pronged strategy. The primary recommendation is accelerated market diversification. Reducing over-reliance on the US market by aggressively boosting exports to the European Union, the United Kingdom, and emerging economies in Africa and Latin America is seen as a critical long-term safeguard.
Simultaneously, there is a renewed push for fast-tracking free trade negotiations with major economies like the UK and the EU to secure more favorable, stable market access. Domestically, the focus is on enhancing competitiveness through improved logistics, lower domestic taxes on exported goods, and sustained production-linked incentive (PLI) schemes to build scale and cost efficiency.
As Ajay Srivastava of GTRI notes, the policy uncertainty necessitates proactive measures. Indian exporters are advised to closely monitor the political developments leading up to the November US elections and begin scenario planning. Building stronger relationships with US clients to share the potential cost burden and exploring opportunities in non-traditional sectors are also part of the suggested contingency planning. The overarching message from the trade community is clear: while the threat is real and significant, strategic preparation and policy agility can help mitigate the risks to India's vital export economy.
