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Donald Trump’s sweeping tariffs have sent shockwaves through global trade, but for India, this disruption could present a golden opportunity—if it plays its cards right.
Rising Tariffs and India’s Position
Starting April 9, Indian exports to the U.S. will face tariffs of up to 27%, significantly higher than the previous average of 3.3%. However, other nations, including China (54%), Vietnam (46%), Thailand (36%), and Bangladesh (37%), have been hit even harder. According to the Global Trade Research Initiative (GTRI), this opens up opportunities for India in key sectors like textiles, electronics, and machinery.
Higher tariffs on Chinese and Bangladeshi textiles, for example, could allow Indian manufacturers to expand in the U.S. market. Meanwhile, the semiconductor industry—where Taiwan faces a 32% tariff—offers India a chance to establish itself in packaging, testing, and lower-end chip production, provided the necessary infrastructure and policy support are in place.
Challenges to India’s Growth Potential
Despite the opportunities, India faces significant hurdles. The country has long struggled with high production costs, regulatory challenges, and logistical inefficiencies. Currently, India’s share of global exports is just 1.5%, and it runs a substantial trade deficit.
While Trump’s tariffs could encourage supply chain shifts, trade experts caution that India’s ability to capitalize on this moment remains uncertain. Countries like Malaysia and Indonesia may be better positioned to absorb redirected investments. Trade expert Biswajit Dhar points out that India has neglected sectors like garments, limiting its ability to regain lost ground.
India’s Response to Trade Tensions
In an effort to maintain strong trade ties with the U.S., India has taken steps to appease Washington. These include:
- Increasing energy imports by $25 billion
- Reducing tariffs on bourbon whiskey, luxury cars, and solar cells
- Scrapping the 6% digital ad tax
- Advancing approvals for Elon Musk’s Starlink
However, these efforts did not shield India from Trump’s tariff hike, marking a setback for ongoing trade negotiations.
Sectors That Could Benefit or Suffer
Winners:
- Pharmaceuticals – India, a leading supplier of generic medicines to the U.S., remains exempt from the new tariffs.
- Renewable energy – Expanding clean energy initiatives could open doors for Indian exports.
Losers:
- Electronics and engineering goods – These sectors, which have received massive investment under India’s production-linked incentive (PLI) schemes, now face significant cost pressures.
- Small exporters – Many small manufacturers may struggle to compete with the 27% tariff hike, making Indian products less attractive.
What Lies Ahead?
Experts believe India must improve ease of doing business, invest in infrastructure, and maintain stable policies to truly benefit from the shifting global trade landscape. While tariffs may create short-term disruptions, they could also serve as a catalyst for India to strengthen its position in global manufacturing—if it acts swiftly.
“This isn’t just about market access; it’s about long-term competitiveness,” says Dhar. However, outpacing China or Vietnam won’t happen overnight. The road ahead remains challenging, but the opportunities are undeniable.
