 "Could India benefit from Donald Trump’s tariffs on Canada, Mexico and China?")
US President Donald Trump’s tariffs on Canada, Mexico and China have caused the rupee to fall to a historic low and shaken the Asian stock markets.
While the Sensex ended 300 points lower at 77,186.74, the Nifty was down 121 points at 23,361.05.
It looks like foreign institutional investors (FIIs) are continuing their exodus from the country.
The rupee on Monday closed at an all-time low of 87.19 against the US dollar.
But could Trump’s tariffs actually play to India’s advantage?
Let’s take a closer look:
From gems and jewellery to processed food and steel
A piece in Moneycontrol, which examined US trade data over the past decade, showed that India could benefit from Trump’s tariffs when it comes to items such as gems and jewellery.
In 2023, gems and jewellery was India’s top exports to the United States in 2023.
However, its share of US imports, at 13.6 percent, was far lower than that of Canada and Mexico combined, at 21 percent.
India could similarly benefit in iron and steel.
New Delhi has a 6.8 per cent share in iron and steel and associated industries compared to 64.4 per cent for Canada and Mexico.
Processed food is another area where India could gain.
New Delhi currently has a 9 per cent share in Washington’s import of processed food.
Canada and Mexico have a 20.5 percent share.
Trump’s tariff on China could also help India.
Categories where Trump hit China with a tariff of 7.5 per cent saw a fall of 24 percent in imports between 2018 and 2023.
In contrast, categories where a 25 percent tariff was imposed witnessed a 47 percent decline in imports to the US.
Moneycontrol earlier found that just a fifth of India’s $25 billion of additional exports to the US from 2019 to 2024 were in traditional categories like medicine and jewellery.
New areas like smartphones comprised the rest.
The study found that America’s reliance on Canada and Mexico will likely be negatively impacted by Trump’s tariffs .
In 2016, both countries comprised 26 per cent of the US imports.
By 2023, that number was at 29 per cent.
Textiles and apparel
Another area India can do well is in apparel.
The US is the largest importer of apparel in the world.
In 2023, it imported apparel worth $79.3 billion – most of it from Asia.
Bangladesh, Cambodia, India, Indonesia, and Pakistan are the biggest suppliers to the US.
Another piece in Moneycontrol quoted data from the United States International Trade Commission (USITC) as showing China was the largest supplier of textiles to the United States from 2013 to 2023.
However, China’s imports of US apparel dropped from 37.7 percent in 2013 to 21.3 percent in 2023.
“This policy shift is likely to accelerate diversification strategies of global brands, positioning India as a key sourcing hub. So, expect growth for home textiles and garments as India captures a larger market share year-to-date calendar year 2024 (January-November 2024), India’s market share in cotton sheet imports to the US improved to 61.3 percent (up 252bps YoY), in total apparel to 6.0 percent (up 22bps YoY) and in cotton apparel to 9.8 percent (up 49bps YoY),” brokerage firm Elara Securities said in a note.
“Global brands are increasingly focusing on diversifying their supply chains beyond Bangladesh, exploring multiple sourcing alternatives to mitigate risks and ensure continuity. While India is among several options being considered, its well-established textiles ecosystem, competitive capabilities, and full-stack solutions position it as a key beneficiary of this strategic shift. We believe India’s robust infrastructure and expertise make it a compelling choice for global brands looking to diversify their outsourcing strategies,” Elara Securities added.
“A stronger US economy under Trump could improve retail sentiment and the potential imports of apparel from India,” brokerage firm JM Financial was quoted as saying.
‘Additional exports of $25 billion possible’
The New Indian Express quoted the Federation of Indian Exports Organisation (FIEO) found that India could add $25 billion in additional exports to the United States as a result of the US’ tariff war with China, Canada and Mexico.
India could export electronics and electricals, automotive parts and components, organic chemicals, apparel and textiles, footwear, furniture and home decor and toys.
Israr Ahmed, vice-president of FIEO, told the newspaper New Delhi could gain from Trump’s tariffs – which are more likely to impact China, Canada and Mexico.
Ahmed recommended that India set aside an additional Rs 250 crore into the Market Access Initiative Scheme to focus on the US for next three years.
“We need to increase our presence in the US by showcasing a large number of exhibitions, buyer-seller meet and tie-up with large local associations of retailers and distributors in the US with proactive support of the government. We want India to be an alternative for US consumers after tariff duties are imposed on competitors,” Ahmed said.
However, the newspaper noted that the textile sector remains wary.
Any tariff hike could negatively impact the exporters in Tiruppur – a prominent textile hub in Tamil Nadu.
A piece in Mint noted that a 10 per cent additional tariff on Chinese goods would benefit Indian exports in sectors such as textiles and auto components.
However, it noted that the tariffs could force China to dump any excess goods at low prices in markets like India.
The Mint piece noted that this could hurt Indian industry unless New Delhi deploys protectionist measures.
In December, NITI Aayog CEO BVR Subrahmanyam said Trump imposing high tariffs on trading partners would lead to “huge opportunities” for India.
“Whatever [Mr.] 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 next few months,” he said and added: “The question is if we actually prepare ourselves, it can lead to a massive boom… because there is going to be trade diversion.”
Subrahmanyam called New Delhi’s relationship with Washington multi-dimensional.
“It is very deep. It’s not standing only on one leg which is trade, there are many many other dimensions. The two nations have a much deeper relationship and all these things will be taken into account,” he said.
A NITI Aayog report showed India sent 21 per cent of its exports to North America in the first quarter of 2024-25
“Merchandise imports showed consistent growth, with Q1 FY25 exports rising by 5.95 per cent to $110 billion and imports increasing by 8.40 per cent to $173 billion, leading to a growing trade imbalance,” the report said.
“Several labour-intensive sectors such as natural and cultured pearls, lac, gums and resins, man-made filaments and articles of leather have seen a decline in India’s share in global exports in the recent years as compared with 2015. India’s share in global services exports has more than doubled, reaching approximately 4.6 per cent in 2023 from two per cent in 2005. It accounts for 10.20 per cent of the world’s services exports in IT services and 7.16 per cent in other business services,” the report added.
With inputs from agencies
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