‘America first’ policy may revive trade tussle over tariffs

NEW DELHI: Donald Trump’s return to the White House may make the world's largest economy more protectionist, experts fear, citing his persistent criticism of trade policies of China and India, and the outsourcing of American jobs to other countries.

Trump may pressurise New Delhi to further liberalise trade tariffs while adopting a tighter American visa regime for skilled workers from other countries, which may impact the Indian IT industry, they told ET.

But the potential negatives on the trade and visa fronts could be more than offset by gains to India from an expected acceleration in the ongoing supply-chain shifts away from China, and from deeper strategic and defence engagements with the US, the experts said. India’s importance as a counterweight to China could probably grow under Trump, they added.


Trump’s “America First” policy could reignite a trade war between Washington and Beijing. Some experts, however, see a window of opportunity for India to ramp up its supplies to the US. This is because Trump has vowed to punish China with much higher tariffs than other nations to restore bilateral trade balance.

Also, given its more domesticallyoriented economy, India would be less vulnerable to higher tariffs than China, Barclays said in a report on Wednesday. “We estimate Trump’s tariff proposals would subtract 2% from China’s GDP – and greater pain on the more open economies in the rest of the region.”

Lower Chinese growth due to US policies could drive down global commodity prices, which would be a positive for a net importer like India.

Noted economist Pronab Sen held that trade issues between the US and India could be a key sticky point under Trump. A September Nomura 2024 report pegged the potential loss to India’s economic growth from Trump’s policies at 10 basis points, way lower than China’s 40 basis points.

“The focus must be on pro-active trade strategy with the US. We should not give more scope for interventions, particularly on tariffs,” said Sachin Chaturvedi, director general at the Research and Information System for Developing Countries.

Nagesh Kumar, CEO at the Institute for Studies in Industrial Development, said there has been a “bi-partisan consensus on the criticality of the India-US relations”, and Trump’s victory could further bolster the dynamics of the IPEF and the QUAD grouping.

Biswajit Dhar, professor at the Jawaharlal Nehru University, said increased tariffs on several products (including steel and aluminium) during Trump’s first term “had a negative impact on India”. “In his trade negotiations with China, he particularly focused on boosting exports of agricultural products,” Dhar said, adding that India can’t afford to import larger quantities of American farm products and hurt our farmers.

WTO QUAGMIRE
Kumar expects a status quo in US’s policy towards the WTO, given Trump’s WTO policies have been broadly followed by the Biden regime as well. Last year, India and the US decided to resolve all seven of their pending trade disputes at the WTO. But under Trump, fresh issues may crop up, some experts fear.