New Delhi: With Donald Trump set to become the President of the United States, trade experts believe that Indian exporters may face higher customs duties for goods such as automobiles, textiles and pharmaceuticals if the new US administration decides to pursue an ‘America First’ agenda.
Experts also said that Trump may also tighten H-1B visa norms, which will hit costs and growth of Indian IT firms.
Over 80 per cent of India’s IT export earnings come from the US, making it vulnerable to changes in visa policies.
The US is India’s largest trading partner, with an annual trade of over US$190 billion.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), said Trump could extend tariffs beyond China to include India and other countries as well.
Trump had previously called India a “big tariff abuser” and dubbed India a ‘tariff king’ in October 2020.
These comments suggest that Trump’s second term could bring tougher trade negotiations, he said.
“His America First agenda will likely push for protective measures such as reciprocal tariffs on Indian goods, which could potentially add barriers to key Indian exports such as automobiles, wine, textiles and pharmaceuticals. These hikes could make Indian products less competitive in the US, impacting revenues in these sectors,” Srivastava said.
However, the US’ tough stance on China could create new opportunities for Indian exporters, he said.
Bilateral trade in goods between the two countries is set to be USD 120 billion in 2023-24, compared to USD 129.4 billion in 2022-23.
According to the WTO’s World Tariff Profile 2023, the US also imposes high duties on items such as dairy products (188 per cent), fruits and vegetables (132 per cent), cereals and food preparations (193 per cent), oilseeds, fats and oils (164 per cent), beverages and tobacco (150 per cent), a GTRI report had earlier said.
International trade expert Biswajit Dhar said Trump will raise tariffs in various sectors as he has to follow his call of MAGA (Make America Great Again).
“With Trump coming to power, we are going to enter a different era of protectionism,” Dhar said, adding that sectors such as electronics could suffer a setback.
He said as Trump has already pulled out of the Trans-Pacific Partnership (TPP), dark clouds may loom over IPEF (Indo-Pacific Economic Framework for Prosperity).
This group of 14 countries was launched by the US and other Indo-Pacific countries in Tokyo on May 23, 2022.
“Let’s see what he does with IPEF,” Dhar warned. He said nothing is expected to move forward at the World Trade Organisation (WTO).
Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO), said “we can expect Mr Trump to push for a more balanced trade. But trade disputes may arise over tariffs”.
Given the rising trend of protectionism, the same will continue with stricter immigration rules, Sahai said.
Agneswar Sen, partner-tax and economic policy (international trade), EY India, said it can be expected that the US will use higher tariffs strategically to onshore manufacturing and replace existing supply chains.
Sen said India could face higher tariffs on exports such as textiles, chemicals, pharma and auto/engineering products.
“India will either have to find alternative markets (which will be difficult) or retaliate by imposing its own tariffs on US exports. Alternatively, we should be prepared for a trade deal that is attractive to the US and at the same time not only protects our existing interests but also creates new ones,” he said. Srivastava further said Trump has expressed concerns about outsourcing and while some of the statements may be campaign rhetoric, India should be prepared for potential measures impacting IT exports. H-1B visa policies are critical for the movement of skilled professionals, especially from India’s IT sector. “Trump’s tough immigration stance could lead to changes in visa rules, which will impact Indian IT professionals and increase costs for Indian IT companies,” the GTRI founder said. However, he added that Trump is expected to ease labour and environmental standards, which could make it easier for Indian exports to enter the US market. “Trump will likely push India to align closely with US geopolitical objectives, which could expand India’s role as an alternative supplier in sectors such as electronics and pharmaceuticals, but potentially limit India’s foreign policy flexibility,” he said.
“Similarly, India’s growing demand for advanced technology, energy, and capital goods from the US opens avenues for expanding bilateral trade. Between FY20 and FY24, India’s merchandise exports to the US grew 46 per cent to USD 77.5 billion from USD 53.1 billion. Imports from the US also rose to USD 42.2 billion in the last fiscal from USD 35.8 billion in 2019-20.
On the other hand, trade in services between the two countries is expected to grow from USD 54.1 billion in 2018 to an estimated USD 70.5 billion in 2024, an increase of 30.3 per cent.
India is also a major destination for US businesses such as professional, scientific and technical services, manufacturing and IT. Washington is the third largest investor. India received USD 66.7 billion between April 2000 and June 2024.
India buys billions of dollars worth of military equipment and Boeing from the US and does more than 90 per cent of its global trade in US dollars.
“US firms like Google, Facebook collect terabytes of data every day and earn billions of dollars in advertising from India every year. Amazon, which had to move from China, is the largest online retailer in India. The US earns dollars from India not just from trade but also from various activities,” Srivastava said.
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