US president-elect Trump's initial volley of tariffs may fly by India

He pledges higher levy on goods from Canada, Mexico, China

India could escape the initial wave of tariff hikes pledged by Donald Trump, with the US president-elect announcing plans to impose a 25 per cent duty on imports from Canada and Mexico and a 10 per cent tariff on Chinese goods.  

Trump’s return to the White House is expected to bring renewed scrutiny towards India. In October, he described India as the “biggest tariff charger” and threatened to introduce reciprocal tariffs.  

During his campaign, Trump floated tariffs ranging from 10 per cent to 20 per cent on imports across the board, with a particularly steep 60 per cent levy on Chinese goods. India, as a major trading partner of the US, could face adjustments that may impact the trade balance, which is in India’s favour with a surplus of $35.3 billion in FY24.  

On Tuesday, Trump announced that on his first day in office, January 20, he would issue an executive order imposing a 25 per cent tariff on all products from Mexico and Canada until both countries address illegal immigration across the border. 

 

“Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem. We hereby demand that they use this power, and until such time that they do, it is time for them to pay a very big price,” he posted on his social media network Truth Social. 

Trump also pledged an additional 10 per cent tariff on Chinese imports unless Beijing halts the flow of synthetic opioids such as fentanyl into the US through Mexico.  

Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis, noted in a LinkedIn post: “Trump’s tariff world is starting to look quite different from what he announced during his campaign… It seems Trump's latest Wall Street appointments will help China limit Trump’s fury while US allies will suffer more. The world is upside down!” 

Manoj Pant, a visiting professor at Shiv Nadar University, argued that India not in Trump’s tariff horizon right now. “He will target mostly the countries that the US trades a lot with. India is not important enough on commodities. He could make noise about outsourcing of services to India. But he can do very little about that, as during his first term the American companies said they will be the biggest losers. He is unlikely to increase tariffs across the board as he doesn’t want to disrupt the domestic inflation situation,” he said.  

But Jayant Dasgupta, a former World Trade Organisation (WTO) ambassador for India, warned that the reprieve could be short-lived and that Trump might target India eventually. “Trump is very unpredictable. If he can raise tariffs on Canada and Mexico with which he changed NAFTA (North American Free Trade Agreement) to USMCA (United States-Mexico-Canada Agreement) in violation of the agreement, then he may do it against India and other countries as well. There is no way India can prepare. India has to be reactive, not proactive, because the other side will take the initiative first,” he said.  

On the tariff threats, S Krishnan, secretary of the Ministry of Electronics and Information Technology (Meity), last week suggested that there could also be an opportunity for India. “Of course, some of the tariffs could be against products from India. But I don’t think we will be the primary target,” he said last week, adding that India should prepare to seize potential advantages.  

Union Finance Minister Nirmala Sitharaman recently hinted that the government could roll back certain increased tariffs if they do not harm domestic industries.    

What's looming 

25% tariff on all products from Mexico and Canada 

Additional 10% tariff on goods from China 

Trump previously pledged to slap tariffs on Chinese imports in excess of 60% 

"One tariff will be followed by another in response," says Mexico President Claudia Sheinbaum 

Automakers Honda, Nissan, Toyota, Kia, Stellantis, Audi, BMW, Volkswagen, BYD and JAC; electronics contract manufacturer Foxconn; computer maker Lenovo; and appliance and consumer electronics giant LG Electronics, besides some of EV firm Tesla's Chinese suppliers are among companies expected to be affected by Trump's decision