Donald Trump's import tariff plans: Way ahead for Indian companies

During his campaign, Donald Trump announced a possibility of 10 per cent ‘import tariffs’ from all countries. Now that Trump has won, analysts and economists are of the view that the global supply chain may take a hit, and will require adaptability. In fact, in his Detroit speech, Trump named India as one of the countries who have a high tariff barrier. He also famously said that he will reduce the income tax to zero, and all the funding will come from import duties. If Trump's election promises follow through, India inc will be significantly impacted.

As per India Brand Equity Foundation, the bilateral trade between India and US stood at $126 Billion, with $78.5 Bn making up exports from India. Despite the significant numbers, Indian companies are already dealing with multiple hurdles like Antidumping and Countervailing Duties (ADCVD), and the increased scrutiny under the Uyghur Forced Labor Prevention Act (ULFPA). These measures have led to higher costs for Indian products, which impacts their competitiveness in the U.S. market. Additionally, U.S. Customs and Border Protection (CBP) is now requiring traceability of materials imported from India to ensure compliance with the ULFPA. “Many Indian companies with large export orders are considering setting up manufacturing facilities in the U.S. to bypass these challenges.” said Rajendra Shrivastav, MD, 5B Renewable.  

Post-victory in the 2024 elections, the Trump administration would likely impose tariff hikes even more far-reaching than those of 2018. The biggest economic impacts won’t just stem from higher shipping costs or U.S. importers paying the new duties—which could then be passed on as higher prices to domestic consumers. More significantly, the mere expectation of impending tariffs could trigger an early surge in ocean demand and prices across global trade. “If Red Sea diversions remain in effect by November, rates would be climbing from levels already well above normal.” Shrivastav said.

However, Kranti Bathini, Director - Equity strategy , WealthMills securities Pvt ltd defers about Trump’s impact on the Indian export market, “He’s more focussed on exports from China and Mexico, because they are dumping goods in the US.” he said. Baithani’s belief is not unfounded since Trump aims to impose a 60 per cent tariff on China. The idea is to impose anti-dumping duties on mass producers that dump sub-standard goods in the US. “When restrictions are imposed on China, India is a key beneficiary.” Baithini said. This is true because a decrease in Chinese exports will provide a boost to Indian manufacturing and export.

Right now we cannot draw a conclusion for sure about the future of Indian exports, but India does not seem to be in hot waters just yet.