Donald Trump’s second presidency could bring sweeping changes to global trade, with India potentially caught in the crossfire. The reimposition of steep tariffs, particularly against BRICS nations, has sparked concerns.
"If BRICS nations continue to de-dollarize, they’ll face 100% tariffs," Trump declared during his inaugural Oval Office address, directly warning India, China, Brazil, and others.
India, labeled a "tariff king" by Trump in the past, could once again find itself under scrutiny. While the U.S.-India trade relationship has grown significantly, with bilateral trade hitting $120 billion in FY24, India’s substantial surplus makes it a target for retaliatory measures. Analysts warn that such tariffs could destabilize key sectors and reshape trade dynamics.
Trump’s comments about imposing 100% tariffs on BRICS nations come as the bloc explores reducing reliance on the U.S. dollar. While Russia and China have led de-dollarization efforts, India’s Reserve Bank has stated it aims only to de-risk domestic trade, not abandon the dollar.
How India's US trade numbers stack up
The U.S. remains India’s largest trading partner, accounting for over 18% of India’s exports. Goods ranging from textiles to pharmaceuticals drive this relationship. Unlike China, where trade imbalances have fueled tensions, India enjoys a more favorable trade balance with the U.S. However, its export diversification efforts mean any tariff increase could hit multiple industries, from IT to automobiles.
Trump also announced an "external revenue service" to collect tariffs and duties, signaling a new era of stringent trade enforcement. He described this as a way to "restore the American dream," promising billions in revenue from foreign sources.
Likely impact Indian IT services, heavily reliant on U.S. markets, could be affected if H-1B visa rules tighten under Trump’s “America First” policy. Meanwhile, high tariffs on automobiles and pharmaceuticals could lock Indian goods out of critical markets.
India has previously imposed counter-tariffs, such as on U.S. steel and aluminum imports in 2018. Trade experts suggest a similar response might be warranted if Trump enforces new duties. However, disruptions to global supply chains could also present opportunities for India to attract manufacturing investments as firms diversify away from China.
The gap An analysis of trade data shows India’s tariff gap with the U.S. remains one of the largest among key trading nations. While China faces a 478-point gap, India’s is 25 points, underscoring the disparity in treatment.
Yet India’s higher domestic tariffs on U.S. goods, such as a 30% duty on tobacco, contrast sharply with the 60% tariff imposed by the U.S. on Indian exports. (source: World Bank)
Trump’s tariff policies could significantly disrupt global trade flows. While this poses risks, such as reduced demand for exports, it also offers India a chance to become a key player in reconfigured supply chains.